What are the variable costs for the decision to send one more person aboard a charter flight that is already 80 percent booked?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Suppose the following costs for a 10-hour round-trip flight apply to the time frame and expenses of an unscheduled 5-hour charter flight from Baltimore to Las Vegas (and return the next day) on a seven-year-old Boeing 737–800 with 120 occupied seats. Some costs listed in the table have been aggregated up to the flight level from a seat-level decision where they are incurred. Others have been allocated down to the flight level from an entry/exit or maintain-ownership company-level decision. Still other costs vary with the go/no go flight-level decision itself. Your job is to analyze each cost item and figure out the “behavior of cost”—that is, with which decision each cost varies.

Fuel and landing fees =$5,200

Quarterly airframe maintenance re: FAA certificate = $1,000

Unscheduled engine maintenance per 10 flight hours =$1,200

Pro rata time depreciation for seventh year of airframe = $7,200

Flight pay for pilots per round-trip flight  = $4,200

Long-term hangar facility lease  = $6,600

Annual aircraft engine operating lease = $7,100

Base salaries of headquarters personnel = $2,000

Food service with seat-by-seat purchase and JIT delivery at each departure = $2,400

Airport ground crew baggage handling for two flight arrivals = $450

 

1. What are the variable costs for the decision to send one more person aboard a charter flight that is already 80 percent booked?

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