Question

Exhibit 14-4 Flight-Route Decision: Worldwide Airways Revenues and Costs under Two Alternatives (a) (b) (c) Nonstop With Stop in Differential Relevant or Irrelevant Route* San Francisco* Amount: (a) (b) Relevant (1) Passenger revenue $240,000 $258,000 $(18,000) Irrelevant (2) Cargo revenue 80,000 80,000 -0– Relevant (3) Landing fee in San Francisco -O (5,000) 5,000 Relevant (4) Use of airport gate facilities -0 (3,000) 3,000 Relevant (5) Flight crew cost (2,000) (2,500) 500 Relevant (6) Fuel (21,000) (24,000) 3,000 Relevant (7) Meals and services (4,000) (4,600) 600 Irrelevant (8) Aircraft maintenance (1,000) (1,000) -0– Total revenue less costs $292,000 $297,900 $ (5,900) osts *In columns (a) and (b), parentheses denote costs and numbers without parentheses are revenues. fIn column (c), parentheses denote differential items favoring option (b).

Refer to Exhibit 14-4 and calculate the total revenue less costs without the irrelevant data.

	Nonstop Route With Stop In San Francisco Differential Amount Total revenue less costs

Answer 1

Solution:

	Nonstop Route	With Stop In San Francisco	Differential Amount
Total relevant revenue	$240,000.00	$258,000.00	-$18,000.00
Total relevant costs	-$27,000.00	-$39,100.00	$12,100.00
Total revenue less costs	$213,000.00	$218,900.00	-$5,900.00