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Profits 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 (flight 482) is as follows: $17,160 1.248 15,912 100.0 2.3 92. Ticket revenue (295 seats 404 occupancy $220 ticket price) Variable expenses (516.00 per person) Contribution margin Flight expenses Salaries, flight crew Flight promotion Depreciation of aircraft Fuet for aircraft Liability insurance Salaries, flight assistants Baggage loading and light preparation Overnight costs for flight crew and assistants at destination Total flight expenses Net operating loss 5 1,800 780 1,250 5.300 5, 10 1,500 1.900 26,930 $13,018) The following additional information is available about flight 482 a. Members of the flight crew are paid fixed annual salaries, whereas the fight assistants are paid based on the number of round trips they complete b. One-third of the liability insurance is a special charge assessed against light 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 flight 482 c. The baggage loading and fight preparation expense is an allocation of ground crews salaries and depreciation of ground equipment Dropping flight 482 would have no effect on the company's total baggage loading and light preparation expenses. d. If flight 482 is dropped, Pegasus Airlines hos no authorization at present to replace it with another flight o, Aircraft depreciabon is due entirely to obsolescence, Depreciation due to wear and tear is negligible 1 Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its null Required: 1. What is the financial advantage (disadvantage) of discontinuing flight 482? The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: year Product Debbie Trish Sarah Mike Seving kit Demand Next Selling Price Direct (units) per Unit Materials 69,000 $42.00 $4.60 61,000 $ 4.50 $1.50 54,000 $30.50 $9.29 46,800 $15.00 $3.90 344,000 $9.90 $5.10 Direct Labor $ 4.00 $1.00 $ 7.0 $5.00 $ 0.5a The following additional information is available: a. The company's plant has a capacity of 100,400 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products, b. The direct labor rate of $10 per hour is expected to remain unchanged during the coming year. Fixed manufacturing costs total $575,000 per year. Variable overhead costs are $2 per direct labor-hour d. All of the company's nonmanufacturing costs are fixed. e. The company's finished goods inventory is negligible and can be ignored. Required: 1. How many direct labor hours are used to manufacture one unit of each of the company's five products? 2. How much variable overhead cost is incurred to manufacture one unit of each of the company's five products? 3. What is the contribution margin per direct labor-hour for each of the company's five products? 4. Assuming that direct labor-hours is the company's constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? 5. Assuming that the company has made optimal use of its 100,400 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct lobortime)? Required 1 Required 2 Required 3 Required 4 Required 5 How many direct labor hours are used to manufacture one unit of each of the company's five products? (Do not Intermediate calculations. Round your answers to 2 decimal places.) Trish Sarah Mike Debbie Sewing Kit Direct labor hours per unit Required 2 Required 1 Required 2 Required 3 Required 4 Required 5 How much variable overhead cost is incurred to manufacture one unit of each of the company's five products? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Debbie Trish Sarah Sewing Kit Variable overhead cost per unit Mike Required 1 Required 2 Required 3 Required 4 Required 5 What is the contribution margin per direct labor-hour for each of the company's five products? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Debbie Trish Sarah Mike Sewing Kit Contribution Margin per DLH Complete this Required 1 Required 2 Required 3 Required 4 Required 5 Assuming that direct labor-hours is the company's constraining resource, what is the highest total contribution margin the company can earn if it makes optimal use of its constrained resource? (Do not round Intermediate calculations, Rou your final answer to a whole dollar amount.) Highest total contribution margin Required 1 Required 2 Required 3 Required 4 Requirements How much employment taxes will the company avoid if it closes the North Store? Employment taxes Required 1 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disad Financial advantage (disadvantage) Complete this question by entering your answers in the tabs below. ce Required 1 Required 2 Required 3 Required 4 Required 5 Assume that the North Store's floor space can't be subleased. However, let's Introduce three more assumptions. First, assume that if the North Stora were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? (Enter any disadvantages as a negative value.) Show less Financial advantage (disadvantage)

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