In an effort to increase profits, Pegasus Airlines is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482 ) is as follows: The following additional information is available about flight 482 : a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against flight 482 because, in the opinion of the insurance company, the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482. c. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on these expenses. d. If flight 482 is dropped, Pegasus Airlines will not replace it with another flight. e. Wear and tear on the aircraft caused by this flight is negligible. f. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll
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