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 $141 for the one-way flight. An average of 82 passengers are on each flight. The variable cost of a filled seat is $23. Aysajan Eziz, the new operations manager, has decided to try a yield revenue approach, with seats priced at $78 for early bookings and at $195 for bookings within 1 week of the flight. He estimates that the airline will sell 67 seats at the lower price and 37 at the higher price. Variable cost will not change Total S contribution in the single price approach is (enter your response as a whole number). Total S contribution in the two price points approach is enter your response as a whole number Which approach is preferable to Mr. Eziz? A. Current model single price O B. Proposed model - two price points

Explanation / Answer

Total $ contribution in single price approach = average seats sold * (single price - variable cost ) = 82*(141-23) = 9676

Total $ contribution in two price points approach = 67*78 + 37*195 - (67+37)*23 = 10049

Total $ contribution of two price points approach is higher. Therefore, preferable approach is

B. proposed model - two price points

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