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Protits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several
Protits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable A typical income statement for one round-trip of one such fight (fight 482) is as follows: $17,000 1,360 15,648 100.ex 8 92% Ticket revenue (170 seats 40% occupancy * $250 ticket price) Variable expenses (520.00 per person) Contribution margin Flight expenses: Salaries, fileht crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, flight assistants Dauge loading and flight preparation Overnight costs for flight crew and assistants et destination Total Fight expenses Tiet operating loss $ 1,800 770 1,700 5,400 4,500 1,300 1,850 18, 120 5.62,460) The following additional information is available about flight 482 a. Members of the night crew are paid fixed annuat salaries, whereas the light assistants are held based on the number of round trips they complete One-third of the ability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company the destination of the flight is in a "high-risk area The remaining two thirds would be unaffected by a decision to drop might 482 The baggage loading and light preparation expense is an allocation of ground crews' satanes and depreciation of ground equipment Dropping night 182 would have no effect on the company's total baggage loading and light preparation expenses d. If right 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another fight e Aircraft depreciation is due entirely to obsolescence Depreciation due to wear and tear is negligible Dropping fight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number or night crew on it Dayron Required: 1 What is the financial advantage disadvantage of discontinuing night 482
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