Fixed, Variable, & Mixed Costs Thank You! In a government report in 2012,1 it wa
ID: 2420269 • Letter: F
Question
Fixed, Variable, & Mixed Costs
Thank You!
In a government report in 2012,1 it was estimated that Air Force One costs the taxpayers $179,750 per hour. Air Force One is a custom-built Boeing 747 for the president's use while in office. (There are technically a few planes that are used as Air Force One, whichever one the president is on is called "Air Force One.") While the president is in office, the president is required by law to use Air Force One for all air travel. The 747 used for Air Force One has 4,000 square feet of space inside on three levels. In addition to having a large office and a conference room, the plane also houses a medical su and a doctor. The doctor is permanently assigned to Air Force One. The plane has two food prep- aration galleys that can feed 100 people at a time. There are also quarters on the plane for those people who travel with the president, including senior advisors, Secret Service, and the press. In addition, several cargo jets typically are used to carry extra provisions, people, and equipment. The $179,750 cost per hour estimate includes fuel, maintenance, engineering support, repairs, food and lodging for the pilots and crew, and other costs. It also includes the cost of military staffing for the onboard communications equipment. The cost may also include the costs of flying extra aircraft and costs of advance scouting trips to the destination to make sure that everything goes as planned.Explanation / Answer
Answer 1 :-
The cost of 179750/- per hour is a mixed cost. As it includes some of the fixed variants and some of the variable cost variants.
Answer 2 :-
Air force one cost is the factor which includes all the cost for air travel of president and person related to security of President.
All the boarding, lodging and secrurity expenses for the same are included in cost per calculated.
Answer 3 :-
Fixed Cost is described as those cost which cannot change irrespective to no of trips of Air travel or hourse spend for Air Travel. Thses may be as follows :-
Salary of President and its security guards.
Daily allowance paid to security people.
Repair cost of aircraft
Annual Maintenance Cost etc. etc.
Variable Cost :-
Fooding of President and its security personnel
Fuel Cost
Power Cost
Travelling Cost includingb boarding and lodging cost etc.
Answer 4:-
The cost per hour is like blanket overhead cost which cover all the cost castly without going into detailed segregation.
This cost gives the approximate cover for all the expenses covered in a particular period given the no. of trips.
Answer 5 :-
The cost per hour can be used for :-
a) For estimating the budgeted cost of Air force one
b) For analysing and defining total cost
c) For defining cost-benefit study.
Answer 6 :-
This total cost should be segregated into :-
a) Fixed Cost
b) Variable Cost
An analysis can be done after this and then overhead should be allocated accordingly.
This way induces cost effective study.
Answer 7 :-
Yes, in case of personal and political trips or use of Air Force One for the same, reimbursement of all the expenses should be done to government.
Answer 8 :-
Taxpayers have to pay for all the expenses spent on governmental activities. Blanket rate of 179750/- covers some fixed expenses which are to be expensed irrespective of Air Force one campain.
So, the policy of covering blanket rate is a bit unfair as per tax payers are concerned.
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