Michael Blue is the owner/pilot of Blue Air Service. The company flies a daily round trip from Seattle’s Lake Union to a resort in Canada. In 2020, the company reported an annual income before taxes of $255,696, although that included a deduction of $61,810, reflecting Michael’s salary:

Revenue ($350 × 1,872 passengers)					$655,200
Less costs:
	Pilot (owner’s salary)		$61,810
	Fuel (29,640 gallons × $3.76)		111,446
	Maintenance (variable)		128,248
	Depreciation of plane		24,500
	Depreciation of office equipment		3,100
	Rent expense		43,200
	Insurance		19,300
	Miscellaneous (fixed)		7,900		399,504
Income before taxes					$255,696

Revenue of $655,200 reflects six round trips per week for 52 weeks with an average of five) passengers paying $350 each per round trip (6 × 52 × 6 × $350 = $655,200). The flight to the resort is 380 miles one way. With 312 round trips (6 per week × 52 weeks), that amounts to 237,120 miles. The plane averages 8 miles per gallon.

A) How many round trips is Michael currently flying, and how many round trips are needed to break even?

B) How many round trips are needed so that Michael can draw a salary of $109,753 and still not show a loss?

C) What is the incremental profit associated with adding a round-trip flight?

Answer rating: 100% (QA)

a How many round trips does Michael now fly and how many are required to break even 6 times a week ... View the full answer