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Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfis base airport to the major city in the state, Metropolis. Each month, 40 round-trip flights are made. Shown below is a recent months activity in the form of a cost-volume-profit income statement.

Fare revenues (400 passenger flights)				$48,000
Variable costs
Fuel		$18,080
Snacks and drinks		720
Landing fees		1,800
Supplies and forms		1,000		21,600
Contribution margin				26,400
Fixed costs
Depreciation		3,050
Salaries		13,200
Advertising		300
Airport hanger fees		1,600		18,150
Net income				$8,250

Break even point in dollars: 33000

Break-even point in number of passenger flights: 275

Contribution margin at the break-even point: 18150

If ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase by the same percentage as passenger flights. (1) How much would net income be impacted by this change? Does net income increase or decrease?

(2) Should the ticket price decrease be adopted? (Yes or no)

Please show how you got this answer. Thank you :(

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