Airway Express has an evening flight from Los Angeles to New York with an averag

Question

Airway Express has an evening flight from Los Angeles to New York with an average of 80 passengers and a return flight the next afternoon with an average of 50 passengers. The plane makes no other trip. The charge for the plane remaining in New York overnight is $1200 and would be zero in Los Angeles. The airline is contemplating eliminating the night flight out of Los Angeles and replacing it with a morning flight. The estimated number of passengers is 70 in the morning flight and 50 in the return afternoon flight. The one-way ticket for any flight is $200.00. The operating cost of the plane for each flight is $11,000. The fixed costs for the plane are $3,000 per day whether it flies or not. A) Should the airline replace its night flight from Los Angeles with a morning flight? b) Should the airline remain in business?

Explanation / Answer

a. total cost in evening flight and return afternoon = 2*11000+3000+1200 =26200 revenue in evening flight and return afternoon = (80+50)*200= 26000 profit = -200 for 2nd option total cost = 25000 revenue= 120*200=24000 profit =-1000 so 1st option is better b. its making loss so no point of remaing in business

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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