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Hawk Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Hawk Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: (Click the icon to view the pricing and ticket information.) Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000. Read the requirements. Requirement 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Before determining if you would charge different prices to business travelers and pleasure travelers, calculate the total contribution margin at each price for each type of traveler. Total contribution margin Business Pleasure Price charged $ 300 1,800 Requirements - X 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. 2. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Hawk Airways implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires? Data table Price Charged $ 300 1,800 Variable Cost per Ticket S 85 190 Print Number of Seats Expected to Be Sold Business 150 Pleasure 75 135 30 Done X

Hawk Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Hawk Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: (Click the icon to view the pricing and ticket information.) Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000. Read the requirements. Requirement 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Before determining if you would charge different prices to business travelers and pleasure travelers, calculate the total contribution margin at each price for each type of traveler. Total contribution margin Business Pleasure Price charged $ 300 1,800 Requirements - X 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. 2. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Hawk Airways implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires? Data table Price Charged $ 300 1,800 Variable Cost per Ticket S 85 190 Print Number of Seats Expected to Be Sold Business 150 Pleasure 75 135 30 Done X

FINANCIAL ACCOUNTING
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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Hawk Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Hawk Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: (Click the icon to view the pricing and ticket information.) Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000. Read the requirements. Requirement 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Before determining if you would charge different prices to business travelers and pleasure travelers, calculate the total contribution margin at each price for each type of traveler. Total contribution margin Pleasure Price charged $ 300 1,800 Business Requirements 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. 2. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Hawk Airways implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires? Print Done -C X Data table Price Charged $ 300 1,800 Variable Cost per Ticket S 85 190 Print Number of Seats Expected to Be Sold Business Pleasure 75 150 135 30 Done
Transcribed Image Text:Hawk Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Hawk Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: (Click the icon to view the pricing and ticket information.) Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000. Read the requirements. Requirement 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Before determining if you would charge different prices to business travelers and pleasure travelers, calculate the total contribution margin at each price for each type of traveler. Total contribution margin Pleasure Price charged $ 300 1,800 Business Requirements 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. 2. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Hawk Airways implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires? Print Done -C X Data table Price Charged $ 300 1,800 Variable Cost per Ticket S 85 190 Print Number of Seats Expected to Be Sold Business Pleasure 75 150 135 30 Done
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