70.2K

Verified Solution

Link Copied!

Profits have been decreasing for several years at Pegasus Alrlines. 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-trlp of one such flight (flight 482) is as follows: The following additional Information is avallable about flight 482 : a. Members of the flight crew are pald fixed annual salarles, whereas the flight assistants are pald based on the number of round trips they complete. b. One-third of the llability Insurance is a speclal charge assessed against flight 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 flight preparation expense is an allocation of ground crews' salarles and depreclation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If flight 482 is dropped, Pegasus Alrlines has no authorization at present to replace it with another flight. e. Alrcraft depreclation is due entirely to obsolescence. Depreclation due to wear and tear is negligible. f. Dropping flight 482 would not allow Pegasus Alrlines to reduce the number of alrcraft in Its fleet or the number of flight crew on Its payroll

Answer & Explanation Solved by verified expert

See Answer