Inter-City (IC) Airlines flies the Los Angeles-Las Vegas route. A full plane carries 100 passengers. All...
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Inter-City (IC) Airlines flies the Los Angeles-Las Vegas route. A full plane carries 100 passengers. All seats are first class. Because this is a short flight no food is served. However drinks are served. The one way (either direction) fare is $420. All tickets are sold through a website operator who receives a sales commission of 10% of fare. The costs per flight are as follows: Flying Crew = $4.000; Fuel Expenditures = $4,000; Aircraft Rental = $5,000; Airport Gate Fees = $2,000; Ground Personnel Costs = $3,000; Allocated overhead = $2,000. In the route from Los Angeles to Las Vegas only soft drinks are served. The Cost is $10 per passenger. In the route from Las Vegas to Los Angeles soft and hard drinks are served. The Cost is $10 per passenger Requirements: 1. How many passengers should IC fly to break-even? 2. How many passengers should IC fly to attain a profit target of $6,000 per flight? 3. Calculate the contribution margin per flight and the contribution margin per passenger. 4. IC plans stand-by fares. Stand-by passengers must purchase their drinks. Commission on stand-by-fares is 20%. What would be the minimum stand-by fare to increase profits? 5. IC reduces regular fares to $360 and negotiated Airport Gate Fees of only $1,000. Recalculate break-even point. 6. If IC cancels a scheduled flight, what costs are irretrievable (sunk)? 7. Enumerate strategies that could increase IC's profit. Inter-City (IC) Airlines flies the Los Angeles-Las Vegas route. A full plane carries 100 passengers. All seats are first class. Because this is a short flight no food is served. However drinks are served. The one way (either direction) fare is $420. All tickets are sold through a website operator who receives a sales commission of 10% of fare. The costs per flight are as follows: Flying Crew = $4.000; Fuel Expenditures = $4,000; Aircraft Rental = $5,000; Airport Gate Fees = $2,000; Ground Personnel Costs = $3,000; Allocated overhead = $2,000. In the route from Los Angeles to Las Vegas only soft drinks are served. The Cost is $10 per passenger. In the route from Las Vegas to Los Angeles soft and hard drinks are served. The Cost is $10 per passenger Requirements: 1. How many passengers should IC fly to break-even? 2. How many passengers should IC fly to attain a profit target of $6,000 per flight? 3. Calculate the contribution margin per flight and the contribution margin per passenger. 4. IC plans stand-by fares. Stand-by passengers must purchase their drinks. Commission on stand-by-fares is 20%. What would be the minimum stand-by fare to increase profits? 5. IC reduces regular fares to $360 and negotiated Airport Gate Fees of only $1,000. Recalculate break-even point. 6. If IC cancels a scheduled flight, what costs are irretrievable (sunk)? 7. Enumerate strategies that could increase IC's profit.
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Answer rating: 100% (QA)
To answer these questions lets go step by step 1 Breakeven point The breakeven point is the number of passengers at which total revenue equals total costs resulting in zero profit Total Costs per Flig... View the full answer
Related Book For
Management Science The Art of Modeling with Spreadsheets
ISBN: 978-1118582695
4th edition
Authors: Stephen G. Powell, Kenneth R. Baker
Posted Date:
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