big apple airlines operates 35 scheduled round-trip flights between NEw York and

Question

big apple airlines operates 35 scheduled round-trip flights between NEw York and CHicago each week. It charges a fixed one-way fare of $200 per passenger. Big Apple Airlines can carry 150 passenger per one-way flight.Fuel and other flight related costs are $5,000 per one-way flight. On-flight refreshments average $5 per passenger. Flying crew, ground crew, advertising, and other administrative expenditures for the New York to Chicago route are $400,000 each week. 1). To make a profit of $700,000 per week, each of the 70 one-way flights must have how many passengers, on average?

2). If the load factor is 60% on all flights(that is, the flights are 60% full), how many flights must Big Apple Airlines operate on this route to earn a total profit of $500,000 per week?

3). What is the cost to Big Apple Airlines for one additinal passenger on a one way flight if the passenger takes a seat that would otherwise go empty?

4). what is the cost to Big Apple Airlines for cancelled flights due to bad weather?

Explanation / Answer

Variable cost per passenger is $5 + 5% of 200 = $15

Fixed cost per week = 70 * 5000 + 400000 = 750,000

1) To make a profit of 700,000

700,000 = -750,000 + 200x - 15x

=> x = 7838

=> 7838/70 per flight = 112 passenger per flight

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