Fundamentals of Cost Accounting
6th Edition
ISBN: 9781260708783
Author: LANEN, William
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 27CADQ
Many airline frequent-flier programs upgrade elite (high volume) flyers one, three, or five days in advance from economy to first class. What are the differential costs of doing this? What are the opportunity costs? What are the opportunity costs of not doing this?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Airline pricing, considerations other than cost in pricing. Costal Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets.
The market research group at Costal Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents:
It is often said that the variable cost associated with a passenger of a low-cost airline carrier such as EasyJet or Ryanair is zero and this allows the airline to offer flights to customers at a very low price or even free. Explain whether you agree with this statement.
Suppose the fixed expenses of a travel agency increase. What will happen to its break-even point, measured in number of clients served? Why?
Chapter 4 Solutions
Fundamentals of Cost Accounting
Ch. 4 - Fixed costs are often defined as fixed over the...Ch. 4 - What is the difference between a sunk cost and a...Ch. 4 - Are sunk costs ever differential costs? Explain.Ch. 4 - What is the difference between short-run and...Ch. 4 - What costs are included in the full cost of a...Ch. 4 - What costs are included in the full cost of a...Ch. 4 - What costs should be considered for a special...Ch. 4 - What are life-cycle product costing and pricing?Ch. 4 - Prob. 9RQCh. 4 - What do the terms target cost and target price...
Ch. 4 - What is predatory pricing? Why is it illegal in...Ch. 4 - What is dumping? What role would a cost accountant...Ch. 4 - What is price discrimination? How could a cost...Ch. 4 - If we want to maximize profit, why do we use unit...Ch. 4 - A company has learned that a particular input...Ch. 4 - Why are production constraints important in...Ch. 4 - What are some nonfinancial factors in decisions to...Ch. 4 - Prob. 18RQCh. 4 - Prob. 19CADQCh. 4 - Prob. 20CADQCh. 4 - As a marketing manager for an airline, would you...Ch. 4 - Prob. 22CADQCh. 4 - You buy an airline ticket to New York City to see...Ch. 4 - Consider the Business Application item,...Ch. 4 - One of your acquaintances notes, This whole...Ch. 4 - A manager in your organization just received a...Ch. 4 - Many airline frequent-flier programs upgrade elite...Ch. 4 - Consider the opportunity costs you identified in...Ch. 4 - Prob. 29CADQCh. 4 - Prob. 30CADQCh. 4 - Prob. 31CADQCh. 4 - Prob. 32CADQCh. 4 - Prob. 33CADQCh. 4 - Prob. 34CADQCh. 4 - Prob. 35CADQCh. 4 - Prob. 36ECh. 4 - Prob. 37ECh. 4 - Pricing Decisions Assume that MTA Sandwiches sells...Ch. 4 - Pricing Decisions Rutkey Collectibles is a small...Ch. 4 - Prob. 40ECh. 4 - Special Order Fairmount Travel Gear produces...Ch. 4 - Target Costing and Pricing Sids Skins makes a...Ch. 4 - Target Costing and Pricing Domingo Corporation...Ch. 4 - Target Costing and Purchasing Decisions Mira Mesa...Ch. 4 - Target Costing Kearney, Inc., makes kitchen tools....Ch. 4 - Make-or-Buy Decisions Mobility Partners makes...Ch. 4 - Make-or-Buy Decisions Mels Meals 2 Go purchases...Ch. 4 - Prob. 49ECh. 4 - Dropping Product Lines Freeflight Airlines is...Ch. 4 - Pappy’s Toys makes two models of a metal...Ch. 4 - Christine’s Chronographs makes two models of a...Ch. 4 - Unter Components manufactures low-cost navigation...Ch. 4 - Special Orders Sherene Nili manages a company that...Ch. 4 - Prob. 55PCh. 4 - M. Anthony, LLP, produces music in a studio in...Ch. 4 - Davis Kitchen Supply produces stoves for...Ch. 4 - Make or Buy King City Specialty Bikes (KCSB)...Ch. 4 - Prob. 59PCh. 4 - Prob. 60PCh. 4 - Prob. 61PCh. 4 - Prob. 62PCh. 4 - Prob. 63PCh. 4 - Agnew Manufacturing produces and sells three...Ch. 4 - Prob. 65PCh. 4 - Power Music owns five music stores, where it sells...Ch. 4 - You have been asked to assist the management of...Ch. 4 - Prob. 68PCh. 4 - Prob. 69PCh. 4 - Prob. 70PCh. 4 - Prob. 71PCh. 4 - Prob. 72PCh. 4 - Slavin Corporation manufactures two products,...Ch. 4 - Prob. 74PCh. 4 - Prob. 75P
Knowledge Booster
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.Similar questions
- Air Americo is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Air Americo segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: Price Charged Variable Costs per Ticket # of Seats Expected to be Sold Business Pleasure 800 2,100 75 300 150 185 285 30 Pleasure travelers start their travel during one week, spend at least I weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same workweek. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,500 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and…arrow_forwardHawk Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Hawk Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: (Click the icon to view the pricing and ticket information.) Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000. Read the requirements.…arrow_forwardFares and Fees in the Airline Industry Navigating the various websites for low fares, avoidingfees for checked bags and priority seating, and finding the right flight schedule can be a real challenge for the average airline passenger. The complexity of options and sources for purchasing a tickethave expanded significantly in recent years. And the outlook for the future is far more complex, asnew search sites (Google, Hipmunk, etc.) become available and some airlines seek more control overwhere and how tickets on their flights are purchased. According to Forrester Research, an independent research company, the airlines want passengers to buy tickets based on value and not on lowprices. They do not want passengers to comparison shop. One major airline even announced that itwanted to deliver fare information directly to customers and to bypass search systems such as Expediaor Travelocity.Required1. Explain why you think competition in the airline industry is a cost leadership or a…arrow_forward
- Analyze Global Airs cost-volume-profit relationships Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per seat for the flight is 760. The costs associated with the flight are as follows: The airline estimates that the flight will sell 175 seats. a. Determine the break-even number of passengers per flight. b. Based on your answer in (a), should the airline add this flight to its schedule? c. How much profit should each flight produce? d. What additional issues might the airline consider in this decision?arrow_forwardWhat costs are relevant when pricing a cargo ship cruise? Challenging economic conditions in several countries have pushed freight ship companies to look for additional sources of revenues in addition to the revenue generated by hauling freight across the ocean. In recent years, one additional source of revenue for these freight companies has been to take on cruise passengers in addition to regular cargo. Generally there are just 2 – 12 passengers on a cargo ship. Demand for cargo ship cruises is high; travelers need to book months in advance. Typically, passengers taking a cruise on a cargo (or container) ship will get an air-conditioned room with private bathroom for about $115 per day. Meals are included; passengers will share three meals a day with the crew. The rooms are cleaned once a week by the ship’s steward. Passengers have to wash their own clothes. Entertainment options include walking or running on deck, playing ping pong or darts, watching or listening to CDs/DVDs, and…arrow_forwardWhat costs are relevant when pricing a cargo ship cruise? Challenging economic conditions in several countries have pushed freight ship companies to look for additional sources of revenues in addition to the revenue generated by hauling freight across the ocean. In recent years, one additional source of revenue for these freight companies has been to take on cruise passengers in addition to regular cargo. Generally there are just 2 – 12 passengers on a cargo ship. Demand for cargo ship cruises is high; travelers need to book months in advance. Typically, passengers taking a cruise on a cargo (or container) ship will get an air-conditioned room with private bathroom for about $115 per day. Meals are included; passengers will share three meals a day with the crew. The rooms are cleaned once a week by the ship’s steward. Passengers have to wash their own clothes. Entertainment options include walking or running on deck, playing ping pong or darts, watching or listening to CDs/DVDs, and…arrow_forward
- Sur Travel Company intends to sell its customers a special round-trip airline ticket package to Salalah. The Company will be able to purchase the package from Oman Air for OMR 140 each. The round-trip tickets will be sold for OMR 172 each and the airline intends to reimburse Sur Travel for any unsold ticket packages. Fixed costs for Sur Travel include OMR 4,000 in advertising costs.How many ticket packages will Sur Travel need to sell to break even? O a. 125 packages O b. 29 packages Oc. 24 packages O d. 13 packagesarrow_forwardHudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?arrow_forwardShow complete solution about this queuing problem. Answers are provided. Just solution how to get it.arrow_forward
- You are trying to decide whether to take a job after you graduate or go onto graduate school. Consider the following questions as you make your decision. A. Which of these costs, for the most part, would be relevant (R), and which would be irrelevant (IR)? Cost of your Undergraduate education Salary with an undergraduate degree Salary with both an undergraduate degree and a graduate degree Rent Car Insurance Graduate school tuition and fees Food costs Moving expenses B. Which of these costs could have a differential amount that is relevant/irrelevant, depending upon the location and or policies of your new job?arrow_forwardSanj Please give me correct answer with explanation..arrow_forwardIn response to the weak economy, your company’ssales force is urging you, the sales manager, to changesales terms from 1/10, n/30 to 2/10, n/45. Explain whatthese terms mean and how this switch could increase ordecrease your company’s profits.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeBusiness/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cost control, Why cost control is necessary for a business?; Author: Educationleaves;https://www.youtube.com/watch?v=yMg3gJx48Fg;License: Standard youtube license