Problem 12-21 Dropping or Retaining a Flight [LO2] Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consideration is being given to dropping several fights 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 the flight: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company, the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop fight 482. c. The baggage loading and fight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If flight 482 is dropped, Pegosus Airlines has no authorization at present to replace it with another flight. e. Alrcraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. t Dropping flight 482 would not allow Pegasus Alrlines to reduce the number of aircraft in its fleet or the number of filght crew on its payroll. a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liablity insurance is a speclal charge assessed against flight 482 because in the opinion of the insurance company, the destination of the fight is in a "high-risk" 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 aliocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If flight 482 is dropped, Pegasus. Airlines has no authorization at present to replace it with another flight. e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll. Required: 1. Prepare an analysis showing what impact dropping filght 482 would have on the airline's profits. (Any losses/ reductions should be indicated by a minus sign. 2. This part of the question is not part of your Connect assignment