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Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Variable Costs Fixed Costs per Passenger Plane depreciation per Flight $9,500 Crew salaries 900 Fuel 2,500 $18 Ground salaries 1,100 12 Airport fees Passenger services Total 2,100 10 $16,100 $40 Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of $180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. seats Determine the contribution margin per passenger for discounted tickets.

Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Variable Costs Fixed Costs per Passenger Plane depreciation per Flight $9,500 Crew salaries 900 Fuel 2,500 $18 Ground salaries 1,100 12 Airport fees Passenger services Total 2,100 10 $16,100 $40 Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of $180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. seats Determine the contribution margin per passenger for discounted tickets.

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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Analyze Pacific Airways Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Fixed Costs Variable Costs per Flight per Passenger Plane depreciation $9,500 Crew salaries 900 Fuel 2,500 $18 Ground salaries 1,100 12 Airport fees 2,100 Passenger services Total $16,100 10 $40 Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of $180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. seats c. Determine the contribution margin per passenger for discounted tickets. d-1. An airlines company wishes to bring a new plan into practice. The company computed the contribution margin before implementing the new plan as $1,120 and after implementing the new plan as $1,150. Identify the summary that suits the given situation. a. The contribution margin has no relevance to new plan implementation. b. The new contribution margin is more than the older margin. It shows a positive flow of funds into the business. c. The differences are very meager and it is not effective to implement the plan. d. The contribution margin before implementing the plan can be relied as it in the practice. d-2. The contribution margin of the company represents: a. The ability of the product to meet its variable costs. b. The amount adjusted against the variable costs. c. The remaining revenue after adjusting the variable costs incurred due to selling additional products. d. The profit earned in the activity.
Transcribed Image Text:Analyze Pacific Airways Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Fixed Costs Variable Costs per Flight per Passenger Plane depreciation $9,500 Crew salaries 900 Fuel 2,500 $18 Ground salaries 1,100 12 Airport fees 2,100 Passenger services Total $16,100 10 $40 Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of $180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. seats c. Determine the contribution margin per passenger for discounted tickets. d-1. An airlines company wishes to bring a new plan into practice. The company computed the contribution margin before implementing the new plan as $1,120 and after implementing the new plan as $1,150. Identify the summary that suits the given situation. a. The contribution margin has no relevance to new plan implementation. b. The new contribution margin is more than the older margin. It shows a positive flow of funds into the business. c. The differences are very meager and it is not effective to implement the plan. d. The contribution margin before implementing the plan can be relied as it in the practice. d-2. The contribution margin of the company represents: a. The ability of the product to meet its variable costs. b. The amount adjusted against the variable costs. c. The remaining revenue after adjusting the variable costs incurred due to selling additional products. d. The profit earned in the activity.
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