Problem $13\mathrm{.}23($Static$)$ Dropping or Retalning a Flight $[$LO$13-2]$

In an effort to Increase profits, Pegasus Airlines is thinking about dropping several flights that appear to be unprofitable.

A typical Income statement for one round$-$trip of one such flight $($flight $482)$ is as follows:

The following additional information is avallable about flight $482$ :

a$.$ Members of the filght crew are paid fixed annual salarles, whereas the filght assistants are pald based on the number of round trips

they complete.

b$.$ One$-$third of the liability Insurance is a speclal charge assessed against flight $482$ because, In the opinion of the Insurance company,

the destination of the flight is in a "high$-$rlsk$"$ area. The remaining two$-$thirds would be unaffected by a decision to drop flight $482$

c$.$ The baggage loading and flight preparation expense is an allocation of ground crews' salarles and depreclatlon of ground

equlpment. Dropping flight $482$ would have no effect on these expenses.

d$.$ If filight $482$ is dropped. Pegasus Airlines will not replace it with another flight.

e$.$ Wear and tear on the alrcraft caused by this flight is negligible.

f$.$ Dropping flight $482$ would not allow Pegasus Airlines to reduce the number of alrcraft in its fleet or the number of flight crew on its

payroll.

Required:

What is the financial advantage $($disadvantage$)$ of discontinuing flight $482?$

Financial advantage

Financial $($disadvantage$)$