Prepare a direct costing income statement

Assignment Help Financial Accounting

Reference no: EM1314965

Computation of Break-even-point of Airline Company.

The Smooth Flight Airline Company is considering lowering fares in an attempt to fill unused seats on its regular flights from New York to Chicago. Current capacity on each flight is 250 passengers. At present, the company sells an average of 130 tickets at $330 per ticket, but estimates that an additional 100 tickets could be sold if it offered a stand-by ticket price of $140 on the day of the flight. Fixed costs per flight are $50,000 and variable costs per ticket are $25.

1. Prepare a direct costing (variable) income statement to show the current profit or loss for each flight at the current level of 130 tickets sold per flight.

2. Prepare a direct costing (Variable) income statement to show the change in profits if the proposed stand-by plan is put into effect.

3. How many tickets must be sold at the $330 price to cover fixed costs?

4. How many tickets must be sold at the $140 price to cover fixed costs, assuming all tickets are at that price?

5. Would you recommend that management adopt the stand-by ticket? WHY OR WHY NOT?

Reference no: EM1314965

Questions Cloud

Distance between points in rectangular coordinate system : In rectangular coordinate system, determine the distance between the points (-4,1) and (8,6).

What is the mass of each hailstone : Differences in analysing a roller coaster system as particle and rigid body, such as the assumption(s) made when treating the roller coaster as particle, parameters involved in kinematic and kinetic analysis.

Challenges faced by public health system : Recognize the two challenges faced by the public health and also discuss how tools and the guidelines of an epidemiological study is applied in finding the answers and strategies for meeting these challenges.

Octor wishes to maximize her profit : If the doctor wishes to maximize her profit, elucidate how many nose operations she should perform each month.

Prepare a direct costing income statement : Prepare a direct costing (Variable) income statement to show the change in profits if the proposed stand-by plan is put into effect. and How many tickets must be sold at the $330 price to cover fixed costs?

Price discrimination by firm-its consequences on consumer : A firm with costs C(Q) = 1,000 + 60Q + 0.1Q2 is able to price-discriminate-What would happen if it were forced to charge all its customers the same price?

Estimation of correlation coefficient : (A) What sums are needed to calculate a correlation coefficient? (B) What are the two ways of testing a correlation coefficient for significance?

This pendulum take for one oscillation : A pendulum of length 1.5 m is held out to point A. At the vertical position, an overhang effectively cuts the length of the pendulum by an amount equal to 1.09 m. (That is, 1.0 m is no longer free to swing.) How long does this pendulum take for one o..

What price should the firm charge to realize the targeted : Illustrate what price should the firm charge to realize the targeted profit. Illustrate what would be its (cost-based) markup ratio.

User Account

All Pages