Assume that a Hong Kong tourist agency approached the president of the airline about flying chartered touristflights from Manila to Hong Kong. The tourist agency has offered the airline P180,000 per round-trip flight ona jumbo jet. Given the airline's usual occupancy rate and airfares, a round-trip jumbo jet generates revenueof P270,000.Sales Revenues:P270,000PassengerCargo40,000P310,000Variable Costs120,000100,000Fixed Costs220,000Net Income90,000If the offer is accepted, the company will not incur reservations and ticketing costs estimated to be P10,000.There is also excess capacity to cater to the additional flights of the special offer.3. Determine the relevant/differential costs.4. Should the offer be accepted?

Solution:- 3) Calculation of Differential/relevant costs as follows under:-

Assume that a Hong Kong tourist agency approached the president of the airline about flying chartered tourist flights from Manila to Hong Kong. The tourist agency has offered the airline P180,000 per round-trip flight on a jumbo jet. Given the airline's usual occupancy rate and airfares, a round-trip jumbo jet generates revenue of P270,000. Sales Revenues: Passenger Cargo P270,000 40,000 P310,000 Variable Costs 120,000 Fixed Costs 100,000 220,000 90,000 Net Income If the offer is accepted, the company will not incur reservations and ticketing costs estimated to be P10,000. There is also excess capacity to cater to the additional flights of the special offer. 3. Determine the relevant/differential costs. 4. Should the offer be accepted?

Assume that a Hong Kong tourist agency approached the president of the airline about flying chartered tourist flights from Manila to Hong Kong. The tourist agency has offered the airline P180,000 per round-trip flight on a jumbo jet. Given the airline's usual occupancy rate and airfares, a round-trip jumbo jet generates revenue of P270,000. Sales Revenues: Passenger Cargo P270,000 40,000 P310,000 Variable Costs 120,000 Fixed Costs 100,000 220,000 90,000 Net Income If the offer is accepted, the company will not incur reservations and ticketing costs estimated to be P10,000. There is also excess capacity to cater to the additional flights of the special offer. 3. Determine the relevant/differential costs. 4. Should the offer be accepted?

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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