Southeastern Airlines\'s daily flight from Atlanta to Charlotte uses a Boeing 73

Question

Southeastern Airlines's daily flight from Atlanta to Charlotte uses a Boeing 737, with all-coach seating for 120 people. In the past, the airline has priced every seat at $142 for the one-way flight. An average of 82 passengers are on each flight. The variable cost of a filled seat is $27. Aysajan Eziz, the new operations manager, has decided to try a yield revenue approach, with seats priced at $83 for early bookings and at $192 for bookings within 1 week of the flight. He estimates that the airline will sell 63 seats at the lower price and 36 at the higher price. Variable cost will not change. Total S contribution in the single price approach is S(enteryour response as a whole number) Total $ contribution in the two price points approach is $ enter your response as a whole number Which approach is preferable to Mr. Eziz? OA. Current model-single price OB. Proposed model -two price points

Explanation / Answer

Contribution = Sales - variable cost

Total $ contribution in the single price approach = number of tickets sale*(price - variable cost) = 82(142-27) = 9430 $

Total $ contribution in the two point price approach =  number of tickets sale*(price - variable cost)

= 63*(83-27) + 36*(192-27) = 3528 + 5940 = 9468 $

Two price points is preferable to Mr. Eziz

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