Pac Coast Airlines has been incurring losses for the past few years. In an attem

Question

Pac Coast Airlines has been incurring losses for the past few years. In an attempt to improve the overall financial performance of the company, the general manager is considering discontinuing several of the flights. Flight 148 from Montreal, Canada to London, England is one such flight. The contribution margin statement for this particular flight is shown below. The following additional information is also available regarding flight 148: 88% of the segment's fixed costs will remain with the company if the flight is discontinued. The remaining amount of fixed costs will no longer be incurred by the company if the flight is discontinued. If the flight is discontinued, contribution margin will increase by a total of $154,000 in other segments of Pac Coast Airlines. Calculate the following items: Do not enter dollar signs or commas in the input boxes. Use the negative sign for negative values or items that are subtracted

Explanation / Answer

Lost Contribution Marging - Flight 148 ($352000)

Aviodable Fixed Costs{ (100-88)% * $843000} $101160

Incremental Contribution Margin - Other Segments $154000

Incremental Effect ($96840)   

There would be a decrease in overall profit

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