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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 flight (flight 482) is as follows: Ticket revenue (105 seats 40 occupancy 65 ticket price) Variable expenses (12.00 per $2, 730100.0 504 18.5 person) Contribution margin Flight expenses: 2,226 81.5% Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft tiability insurance Salaries, flight aasiatants Baggage Loading and flight preparation Overnight costa for flight crew and 310 680 430 160 180 700 200 60 2,720 (494) atant at destination Total flight expenses Net operating toas The following additional information is available about flight 482 a Members of the flight crew are paid fixed annual salaries, whereas the flight 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 flight 482 because in the opinion of the insurance company, the destination of the fight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop fight 482 c. The baggage loading and flight 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 fight preparation expenses d. If flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with anotner fight. e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f. Dropping flight 482 would not allow Pegasus Airtlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll. Required: 1 What is the financial advantage (disadvantage) of discontinuing flight 482? Answer is complete but not entirely correct

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