As an analyst at Delta Airlines, you are asked to help the operations staff. Operations have...
As an analyst at Delta Airlines, you are asked to help the operations staff. Operations have identified a new method of loading baggage that is expected to result in a 30 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $6 per bag. Other costs are $5 per bag. Required: a-1. What differential costs should the operations staff consider the decision to use the new method next year? a-2. What would be the cost savings per bag using it? (Round your answer to 2 decimal places.) b. How would management use the information in requirement (a) and any other appropriate information to proceed with the contemplated use of the new baggage loading method? Differential costs would not play a significant role in management's decision. Management would make their decision based strictly on the differential costs. Management would use the information, but would also want to know the effect on quality.
Homework Answers
Part a-1
|
Differential cost |
Labor cost |
Differential costs refers to the costs that varies with the change (mostly output level). In the given situation, it is the labor cost which is supposed to change.
Part a-2
|
Cost savings per bag |
$1.80 |
$6*30% = $1.80
Part B
Option C
Management would use the information, but would also want to know the effect on quality.
(Information would be used by the management to make decision regarding the use of new method. Besides, it would be interested in knowing the effect on quality)
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As an analyst at Delta Airlines, you are asked to help the
operations staff. Operations have...
As an analyst at Delta Airlines, you are asked to help the operations staff. Operations has...
As an analyst at Delta Airlines, you are asked to help the operations staff. Operations has identified a new method of loading baggage that is expected to result in a 35 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $12 per bag. Other costs are $11 per bag. Required: a-1. What differential costs should the operations staff consider for the decision to use the new method next year?...
help help Protits have been decreasing for several years at Pegasus Airlines. In an effort to...
help help
Protits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 3,680 552 3,128 100.0% 15 85% 370 Ticket revenue (115 seats x 40% occupancy * $80 ticket price) Variable expenses ($12.00 per person) Contribution margin Flight expenses: Salaries, flight crew...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 15,840 1,296 14,544 100.0% 8.2 91.8% Ticket revenue (180 seats x 40% occupancy * $220 ticket price) Variable expenses ($18.00 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company 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: Ticket revenue (115 seats × 40% occupancy × $70 ticket price) $ 3,220 100.0 % Variable expenses ($14.00 per person) 644 20 Contribution margin 2,576 80 % Flight expenses: Salaries, flight crew $ 380...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company 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: Ticket revenue (165 seats × 40% occupancy × $220 ticket price) $ 14,520 100.0 % Variable expenses ($19.00 per person) 1,254 8.6 Contribution margin 13,266 91.4 % Flight expenses: Salaries, flight crew $...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company 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: Ticket revenue (190 seats × 40% occupancy × $220 ticket price) $ 16,720 100.0 % Variable expenses ($17.00 per person) 1,292 7.7 Contribution margin 15,428 92.3 % Flight expenses: Salaries, flight crew $...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
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 flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (100 seats × 40% occupancy × $65 ticket price) $ 2,600 100 % Variable expenses ($12.00 per person) 480 18.5 Contribution margin 2,120 81.5 % Flight expenses: Salaries, flight crew...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
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 flights that appear to be unprofitable. A typical income statement for one such flight (Flight 482) follows: Ticket revenue (100 seats 80% occupancy * $325 ticket price) Less: Variable expenses ($26 per person) $26,000 2,080 100.0% 8.0 Contribution margin 23,920 92.0% Less: Flight expenses: Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 3,150 462 2,688 100.00 14.7 85.38 Ticket revenue (105 seats x 408 occupancy $75 ticket price) Variable expenses ($11.00 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation of...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 17,500 100.0% 1,3307 .6 16,170 92.4% Ticket revenue (175 seats x 40% occupancy x $250 ticket price) Variable expenses ($19.00 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation...
help help
Protits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 3,680 552 3,128 100.0% 15 85% 370 Ticket revenue (115 seats x 40% occupancy * $80 ticket price) Variable expenses ($12.00 per person) Contribution margin Flight expenses: Salaries, flight crew...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 15,840 1,296 14,544 100.0% 8.2 91.8% Ticket revenue (180 seats x 40% occupancy * $220 ticket price) Variable expenses ($18.00 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation...
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 flights that appear to be unprofitable. A typical income statement for one such flight (Flight 482) follows: Ticket revenue (100 seats 80% occupancy * $325 ticket price) Less: Variable expenses ($26 per person) $26,000 2,080 100.0% 8.0 Contribution margin 23,920 92.0% Less: Flight expenses: Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 3,150 462 2,688 100.00 14.7 85.38 Ticket revenue (105 seats x 408 occupancy $75 ticket price) Variable expenses ($11.00 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation of...
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company 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: $ 17,500 100.0% 1,3307 .6 16,170 92.4% Ticket revenue (175 seats x 40% occupancy x $250 ticket price) Variable expenses ($19.00 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation...
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