A company finds that, on the average, two of its engineers, always travelling together, spend 60 hours each month in flying on commercial airlines in making service calls to customer's plants. Also, the cost for airline tickets, airport buses, car rental, and so on is approximately Php 85,000 per person per month. An air charter service offers to supply a small business jet and pilot on 24-hour notice at a cost of Php 55,000 per month plus Php 5,625 per hour of flying time and Php 1,200 per hour of waiting time on the ground at the destination. It states that experience for similar situations has shown that using the charter service will reduce total travel time by 50%. The company estimates that the cost of car rental at destinations probably would amount to about Php11,250 per month if the charter service is used, and the average waiting time will be about 45 hours per month. It also estimates that each engineer's time is worth Php 1,800 per hour to the company. Should the charter service be used?

A company finds that, on the average, two of its engineers, always travelling together, spend 60 hours each month in flying on commercial airlines in making service calls to customer's plants. Also, the cost for airline tickets, airport buses, car rental, and so on is approximately Php 85,000 per person per month. An air charter service offers to supply a small business jet and pilot on 24-hour notice at a cost of Php 55,000 per month plus Php 5,625 per hour of flying time and Php 1,200 per hour of waiting time on the ground at the destination. It states that experience for similar situations has shown that using the charter service will reduce total travel time by 50%. The company estimates that the cost of car rental at destinations probably would amount to about Php11,250 per month if the charter service is used, and the average waiting time will be about 45 hours per month. It also estimates that each engineer's time is worth Php 1,800 per hour to the company. Should the charter service be used?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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