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Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company$$s performance, the company 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:

Ticket revenue $(175$ seats $\backslash$times $40\%$ occupancy $\backslash$times $$250$ ticket price$)$ $ $17,500100\mathrm{.}0\%$

Variable expenses $($$$16\mathrm{.}00$ per person$)1,1206\mathrm{.}4$

Contribution margin $16,38093\mathrm{.}6\%$

Flight expenses:

Salaries, flight crew $ $1,800$

Flight promotion $800$

Depreciation of aircraft $1,750$

Fuel for aircraft $5,200$

Liability insurance $5,100$

Salaries, flight assistants $1,500$

Baggage loading and flight preparation $1,750$

Overnight costs for flight crew and assistants at destination $600$

Total flight expenses $18,500$

Net operating loss $ $(2,120)$

The following additional information is available about flight $482$:

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.

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 $482.$

The baggage loading and flight preparation expense is an allocation of ground crews$$ salaries and depreciation of ground equipment. Dropping flight $482$ would have no effect on the company$$s total baggage loading and flight preparation expenses.

If flight $482$ is dropped, Pegasus Airlines has no authorization at present to replace it with another flight.

Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible.

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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