Khaleej Airways has wide network of flights all over GCC. Most of the flights operate to orfrom the company's headquarter, an airport based in Gulf..The Khaleej Airways' executive management receives monthly reports on the profitability of eachflight route, and any loss-making routes that are considered to be closed. The report below showsthe average loss on each one-way flight between Oceana and Peninsula (in either direction):BHDBHDSales of Ticket (occupancy is 60% & aircraft is 150 seater)9,000Price of Ticket =BHD100Operating Cost:Security (Airport) ChargeAdvertising ExpenseFuel (Aviation)DepreciationSalaries (Airline Crew)(450)(600)(3,600)(2,200)(1,100)Staff on ground Expense(800)(2,400)(500)InsuranceAllowance for Airline crew (overnight stay)Total operating costsLoss11,6502,650 The following additional information is also available:1- All airports charge a security charge based on the number of seats occupied on each departing flight.2- The advertising expense relates to the cost of current press advertisement campaign toretain public awareness of Khaleej Airways' Oceana-Peninsula route.3- Depreciation of the aircraft occurs almost entirely through obsolescence and not through usage.4- Airline crew members are employed on permanent contracts basis and the airline has invested huge amounts in training thesecrews.5- Khaleej airways don't have their own ground staff as they have hired these servicesthrough an outsourced agency.6- BHD600 out of the total insurance costs relate to the public limited liability insurance of this flight. BHD1,800 remaining is an allocationto the Khaleej airways companywide insurance related cost.REQUIRED:Taking the above information into consideration:A) Judge if Khaleej airways should discontinue this flight and explain in your own words and supported with wider readings andresearch, why certain costs are considered relevant and others irrelevant in taking such decisions.B) Suggest or recommend other information if given, would assist you in providing more accurate calculation of the financialimplications of this flight being discontinued and elaborate how can Khaleej airways benefit from using the information identified,using your own wider research.

Answered: Image /qna-images/answer/0e079dfb-6640-427b-868b-6299ea521228.jpg

Khaleej Airways has wide network of flights all over GCC. Most of the flights operate to or from the company's headquarter, an airport based in Gulf.. The Khaleej Airways' executive management receives monthly reports on the profitability of each flight route, and any loss-making routes that are considered to be closed. The report below shows the average loss on each one-way flight between Oceana and Peninsula (in either direction): BHD BHD Sales of Ticket (occupancy is 60% & aircraft is 150 seater) 9,000 Price of Ticket =BHD100 Operating Cost: Security (Airport) Charge Advertising Expense Fuel (Aviation) Depreciation Salaries (Airline Crew) (450) (600) (3,600) (2,200) (1,100) (800) (2,400) (500) Staff on ground Expense Insurance Allowance for Airline crew (overnight stay) Total operating costs 11,650 Loss 2,650

Khaleej Airways has wide network of flights all over GCC. Most of the flights operate to or from the company's headquarter, an airport based in Gulf.. The Khaleej Airways' executive management receives monthly reports on the profitability of each flight route, and any loss-making routes that are considered to be closed. The report below shows the average loss on each one-way flight between Oceana and Peninsula (in either direction): BHD BHD Sales of Ticket (occupancy is 60% & aircraft is 150 seater) 9,000 Price of Ticket =BHD100 Operating Cost: Security (Airport) Charge Advertising Expense Fuel (Aviation) Depreciation Salaries (Airline Crew) (450) (600) (3,600) (2,200) (1,100) (800) (2,400) (500) Staff on ground Expense Insurance Allowance for Airline crew (overnight stay) Total operating costs 11,650 Loss 2,650

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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