Question
Second City Airlines owns one aircraft (capacity =120 passengers) and can operate 20 scheduled one-way flights between NewYork City and Pittsburgh each week. It charges
Second City Airlines owns one aircraft (capacity =120 passengers) and can operate 20 scheduled one-way flights between NewYork City and Pittsburgh each week. It charges a fixed one-way fare of $150 per passenger. Fuel and other flight-related costs are $5,000 per one-way flight. On-flight meal costs are $11 per passenger. Sales commissions averaging 6% of fare are paid to travel agents. Flying crew, ground crew, advertising and other administrative costs amount to $210,000 each week.
Required:
1. Assuming that Second City has decided to operate 20 one-way flights, how many passengers must each of the one-way flights have on average to make a total after-tax profit of $20,000 per week? Assume that the income tax rate is 35%.
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