Jet Green hubs using a basis of annual number of flights in and out of ea distri

Question

Jet Green hubs using a basis of annual number of flights in and out of ea distributed as follows irways historically distributes the indirect costs of lost and damaged baggage to its three major ch hub. Last year $667,500 budget was 3. Hub Airport Flights Rate Allocation, $ Dallas/ Fort Worth (DFW)55,000 20,833 Toronto (YYZ) Mexico city (MEX) 6/ flight S9/ flight $10/ flight 15,000 The airline's baggage management director suggests that an allocation on the basis of baggage traffic, not flights, will better represent the distribution, primarily based on the fact that the high fees now charged to passengers to check luggage have significantly changed the number of bags handled at the major hubs. Using last year $667,500 budget, the allocation was distributed as: Total baggage handled 2,490,000 1,582,400 763,500 Allocation, $ Hub Airport Dallas/ Fort Worth (DFW) Toronto (YYZ) Mexico city (MEX) Find the indirect cost allocations for tables above using traditional and/or ABC allocation? Which allocation method is more beneficial for each airport? a. b.

Explanation / Answer

Indirect cost allocation using traditional method (basis of annual number of flights in and out of each hub):

Indirect cost allocation using ABC method (basis of baggage traffic):

Total Baggage handled: 2490000+1582400+763500=4835900

While traditional allocation method (basis of annual number of flights in and out of each hub) is more beneficial for Dallas/Fort Worth (DFW) hub and Toronto (YYZ) hub due to low share of indirect cost, the ABC allocation method (basis of baggage traffic) is more beneficial for Mexico City (MEX) hub due to low share of indirect cost.

Hub Airport Flights * Rate Allocation ($) Dallas/Fort Worth (DFW) 55,000*6 330,000 Toronto (YYZ) 20,833*9 187,497 Mexico City (MEX) 15,000*10 150,000

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.