The ABC Airlines sells a ticket for $300 to fly from Chicago to Denver. The cost
ID: 2349133 • Letter: T
Question
The ABC Airlines sells a ticket for $300 to fly from Chicago to Denver. The costs incurred by the airlines include the following:Depreciation of the plane (per flight).... $2,000
Cost of using airplane terminals (per flight).... $10,000
Wages of the flight crew (per flight).... $50,000
Snacks (per passenger)... $3
Wages of baggage handlers (per passenger)... $40
Wages of ticketing personnel (per passenger)... $25
Security in the airport (per flight)... $2,000
Jet fuel (per flight)... $5,000
The plane can accommodate 300 passengers. Currently only 210 passengers are registered for the this flight The boy scouts would like to purchase 20 tickets at a special price of $140 per ticket. It is not expected that the sale of these tickets would cause the flight to be overbooked. Because the troop is exceeding allowable luggage requirements (due to packing their special hiking gear), an additional cost of $2,000 will be incurred by the airline.
What is the net increase or decrease in the airlines' net operating income if they accept the special price?
A. $1,440
B. ($1,440)
C. $560
D. ($560)
Explanation / Answer
C. $560
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