Pac Coast Airlines has been incurring losses for the past few years. In an attempt to improve the overallfinancial performance of the company, the general manager is considering discontinuing several of theflights. Flight 102 from Atlanta, Georgia to Paris, France is one such flight. The contribution marginstatement for this particular flight is shown below.Pac Coast AirlinesContribution Margin StatementFor the Year Ended December 31, 2019Flight 102 Revenue $2,000,000Less: Variable Costs 1,500,000Contribution Margin 500,000Less: Fixed

Pac Coast Airlines has been incurring losses for the past few years. In an attempt to improve the overallfinancial performance of the company, the general manager is considering discontinuing several of theflights. Flight 102 from Atlanta, Georgia to Paris, France is one such flight. The contribution marginstatement for this particular flight is shown below.Pac Coast AirlinesContribution Margin StatementFor the Year Ended December 31, 2019Flight 102 Revenue $2,000,000Less: Variable Costs 1,500,000Contribution Margin 500,000Less: Fixed

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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Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: Selling price per membership Variable costs per membership Contribution margin Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P400 270 130 P150,000 70,000 25,000 50,000 If they continue operating, the company will be forced to reduce the membership selling price by 12.50%. The demand for the club is 4,000 memberships. 7. Shutdown costs 8. Shutdown savings 9. Shutdown point
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