Suppose the following costs for a 10-hour round-trip flight apply to the time frame and expenses of an unscheduled 5-hour charter flight from Baltimore to
Suppose the following costs for a 10-hour round-trip flight apply to the time frame and expenses of an unscheduled 5-hour charter flight from Baltimore to Las Vegas (and return the next day) on a seven-year-old Boeing 737-800 with 120 occupied seats. "Some costs listed in the table have been aggregated up to the flight level from a seat-level decision where they are incurred. Others have been allocated down to the flight level from an entry/exit or maintain-ownership company-level decision. Still other costs vary with the goo go flight-level decision itself. Your job is to analyze each cost item and figure out the "behavior of cost"-that is, with which decision each cost varies. Fuel and landing fees $5,200 Quarterly airframe maintenance re: FAA certificate 1,000 Unscheduled engine maintenance per 10 flight hours 1,200 Pro rata time depreciation for seventh year of airframe 7,200 Flight pay for pilots per round-trip flight 4,200 Long-term hangar facility lease 6,600 Annual aircraft engine operating lease 7,100 Base salaries of headquarters personnel 2,000 Food service with seat-by-seat purchase and JIT delivery at each departure 2,400Airport ground crew baggage handling for two flight arrivals 450 Questions 1. What are the variable costs for the decision to send one more person aboard a charter flight that is already 80 percent booked? 2. In making an entry/exit decision, if competitive pressure is projected to force the price down to $300, what is the break-even unit sales volume this company should have projected as part of its business plan before entering this market and should reconsider each time it considers leaving (exiting) this business altogether
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance