Product Costing and Decision Analysis for a Passenger Airline Required: 1. Deter

Question

Product Costing and Decision Analysis for a Passenger Airline

Required:

1. Determine the fuel, crew, and depreciation cost per mile flown.
$ per mile

2. Determine the cost per arrival or departure by terminal city.

3. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs. Enter all amounts as positive numbers, except for a negative income from operations.

Blue Star Airline

Flight Profitability Report

For Three Representative Flights

Flight 101

Flight 102

Flight 103

Passenger revenue

$  

$  

$  

Fuel, crew, and depreciation costs

$  

$  

$  

Ground personnel

  

  

  

$  

$  

$  

Flight income from operations

$  

$  

$  

Charlotte $ Pittsburgh $ Detroit $ San Francisco $

Explanation / Answer

1)

Fuel, crew, and depreciation cost per mile flown =( Fuel Cost + Crew Cost + Depreciation)/Expected Miles

Fuel, crew, and depreciation cost per mile flown = (2120000+ 850000+430000)/170000

Fuel, crew, and depreciation cost per mile flown = $ 20 per mile

2)

3)

Working

Terminal City Estimated Overhead Number of Arrival/Departure Cost per arrival or departure [a] [b] [c] [b/c] Charlotte 256000 320                                         800 Pittsburgh 97500 130                                         750 Detroit 129000 150                                         860 San Francisco 306000 340                                         900

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