JARMON AIRLINES IS A SMALL AIRLINE THAT SOMETIMES CARRIES OVERLOAD SHIPMENTS FOR

Question

JARMON AIRLINES IS A SMALL AIRLINE THAT SOMETIMES CARRIES OVERLOAD SHIPMENTS FOR THE OVERNIGHT DELIVERY COMPANY NEVER FAIL INC. WHEN NEVER FAIL HAS MORE PACKAGES THEN IT CAN DELIVER, IT PAYS JARMON TO CARRIE THE EXCESS. JARMON CONTRACTS WITH INDEPENDENT PILOTS TO FLY ITS PLANES ON PER ROUND TRIP BASIS. JARMON PURCHESED AN AIRPLANE THAT COST THE COMPANY 24,000,000 THE PLANE HAS A USEFULL ESTAMATED LIFE OF 100,000,000 MILES AND A SALVAGE VALUE OF ZEROTHE FIRST WEEK IN JANUARY JARMON FLEW TWO TRIPS, THE FIRST TRIP WAS A ROUND TRIP FROM CHICAGO TO SAN FRANCISCO, JARMON PAID 500 FOR A PILOT AND 350FOR THE FUEL THE SECOND TRIP WAS FROM CHICAGO TO NEWYORK FOR THIS TRIP IT PAID 300 FOR A PILOT AND150 FOR THE FUEL THE FIRST ROUND TRIP WAS EASTIMATED TO BE 4,400 MILES THE SECONDE ROUND TRIP WAS ESTAMATED TO BE 1,600 MILES

Explanation / Answer

First trip Direct Costs Pilots charges - $500 Fuel Charges -   $350 Total Direct Charges $850 Indirect Charges Depreciation 0.24 × 4400 $1,056 Total Cost $1,906 First trip Direct Costs Pilots charges - $300 Fuel Charges -   $150 Total Direct Charges $450 Indirect Charges Depreciation 0.24 × 1600 $384 Total Cost $834 Note : Depreciation per nautical mile is given by 24,000,000 / 100,000,000 which is 0.24

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