Overtime Premiums and Fringe Benefit Costs; Airline
Heartland Airways operates commuter flights in three Midwestern states. Due to a political convention held in Topeka, the airline added several extra flights during a two-week period. Additional cabin crews were hired on a temporary basis. However, rather than hiring additional flight attendants, the airline used its current attendants on overtime. Monica Gaines worked the following schedule on August 10. All of Gaines's flights on that day were extra flights that the airline would not normally fly.
Regular time: | 2 round-trip flights between Topeka and St. Louis (8 hours) |
Overtime: | 1 one-way flight from Topeka to Kansas City (3 hours) |
Gaines earns $12 per hour plus time and a half for overtime. Fringe benefits cost the airline $3 per hour for any hour worked, regardless of whether it is a regular or overtime hour.
Required:
1. Compute the direct cost of compensating Gaines for her services on the flight from Topeka to Kansas City.
2. Compute the cost of Gaines's services that is an indirect cost.
3. How should the cost computed in requirement (2) be treated for cost accounting puiposes?
4. Gaines ended her workday on August 10 in Kansas City. However, her next scheduled flight departed Topeka at 11:00 a.m. on August 11. This required Gaines to “dead-head” back to Topeka on an early-morning flight. This means she traveled from Kansas City to Topeka as a passenger, rather than as a working flight attendant. Since the morning flight from Kansas City to Topeka was full, Gaines displaced a paying customer. The revenue lost by the airline was $82. What type of ' cost is the $82? To what flight, if any, is it chargeable? Why?
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