bartleby

Concept explainers

bartleby

Videos

Textbook Question
Book Icon
Chapter 26, Problem 26.6BPR

Product costing and decision analysis for a service company

Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month:

Fuel $2,120,000
Ground personnel 788,500
Crew salaries 850,000
Depreciation 430,000
Total costs $4,188,500

Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs:

Airline Cost Activity Base
Fuel, crew, and depreciation costs Number of miles flown
Ground personnel Number of arrivals and departures at an airport

The size of the company’s ground operation in each city is determined by the size of the workforce. The following data are available from corporate records for each terminal operation:

Terminal City Ground Personnel Cost Number of Arrivals/Departures
Charlotte $256,000 320
Pittsburgh 97,500 130
Detroit 129,000 150
San Francisco 306,000 340
Total $788,500 940

Three  recent representative flights have been selected for the profitability study. Their characteristics are as follows:

  Description Miles Flown Number of Passengers Ticket Price per Passenger
Flight 101 Charlotte to San Francisco 2,000 80 $695,00
Flight 102 Detroit to Charlotte 800 50 441,50
Flight 103 Charlotte to Pittsburgh 400 20 382,00

Instructions

1. Determine the fuel, crew, and depreciation cost per mile flown.

2. Determine the cost per arrival or departure by terminal city.

3. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.

Blurred answer
Students have asked these similar questions
General Accounting
Financial Accounting
Peak manufacturing is planning to sell solve this accounting questions

Chapter 26 Solutions

Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th

Ch. 26 - Single plantwide factory overhead rate The total...Ch. 26 - Single plantwide factory overhead rate The total...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity based costing: factory overhead costs The...Ch. 26 - Activity-based costing: factory overhead costs The...Ch. 26 - Activity-based costing: selling and administrative...Ch. 26 - Activity-based costing: selling and administrative...Ch. 26 - Activity-based costing for a service business...Ch. 26 - Activity-based costing for a service business...Ch. 26 - Single plantwide factory overhead rate Nixon...Ch. 26 - Single plantwide factory overhead rate Matts Music...Ch. 26 - Single plantwide factory overhead rate Sally...Ch. 26 - Prob. 26.4EXCh. 26 - Multiple production department factory overhead...Ch. 26 - Single plantwide and multiple production...Ch. 26 - Single plantwide and multiple production...Ch. 26 - Identifying activity bases in an activity-based...Ch. 26 - Product costs using activity rates Nozama.com Inc....Ch. 26 - Prob. 26.10EXCh. 26 - Prob. 26.11EXCh. 26 - Activity cost pools, activity rates, and product...Ch. 26 - Activity-based costing and product cost distortion...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity-based costing and product cost distortion...Ch. 26 - Single plantwide rate and activity-based costing...Ch. 26 - Evaluating selling and administrative cost...Ch. 26 - Prob. 26.18EXCh. 26 - Prob. 26.19EXCh. 26 - Activity-based costing for a service company...Ch. 26 - Activity-based costing for a service company...Ch. 26 - Single plantwide factory overhead rate Orange...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity-based and department rate product costing...Ch. 26 - Prob. 26.4APRCh. 26 - Prob. 26.5APRCh. 26 - Product costing and decision analysis for a...Ch. 26 - Single plantwide factory overhead rate Spoiled Cow...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity-based department rate product costing and...Ch. 26 - Activity-based product costing Sweet Sugar Company...Ch. 26 - Allocating selling and administrative expenses...Ch. 26 - Product costing and decision analysis for a...Ch. 26 - Prob. 26.1CPCh. 26 - Prob. 26.2CPCh. 26 - Activity-based costing for a service company Wells...Ch. 26 - Using a product profitability report to guide...Ch. 26 - Prob. 26.5CPCh. 26 - Prob. 26.6CP
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Text book image
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Text book image
Entrepreneurial Finance
Finance
ISBN:9781337635653
Author:Leach
Publisher:Cengage
Text book image
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY