WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant's report shows the following:

Activity Activity Measure (cost driver)Unit Cost (cost per unit of activity)Flying and maintaining air craft Number of flights$1,900per flight Serving passengers Number of passengers$5per passenger Advertising and marketing Number of promotions$54,000per promotion

WSM estimates the following annual information. With 20 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $240. The lease of the 60-seat aircraft will cost $4,800,000. Other equipment costs will be $2,400,000. Administrative and other marketing costs will be $1,300,000.

c. Assume that WSM management decides not to adopt the Internet strategy, regardless of your answer to requirement (b). Instead, it is now considering a plan to sell tickets at two prices. An unrestricted ticket (good for travel at any time on any day) would sell for $ 265. A discount ticket, good for reservations made in advance, would sell for $125. Management estimates that it can sell 35,000 tickets (25 per flight) at the unrestricted airfare of $265. All other data remain the same.

Ignoring the information in requirement (b), how many discounted tickets would WSM have to sell annually to earn an operating income of $1,000,000? Assume that the annual number of flights remains at 1,400 and that the discounted tickets would be evenly divided across the 1,400 flights.

required;

Numbers of discount tickets:???

Answer rating: 100% (QA)

Number of flights 1400 Seats per flight 60 Unrestricted tickets sold per flight at 265 25 Total unre... View the full answer