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Scenic Flights provides 3 hour sightseeing flights over the Eastern Sea Board along the Greet...

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Accounting

Scenic Flights provides 3 hour sightseeing flights over the Eastern Sea Board along the Greet Ocean Road near Lorne Victoria. The average flight has 20 passengers on board. Each passenger pays $300 for a 2 hour scenic flight. The business averages 90 flights each year based on current demand over the weekend Saturday and / or Sunday dependent on demand. Each flight requires two pilots who are each paid $500 per flight and two flight attendants who receive $200 each per flight. Pilots and flight attendants are employed on a casual basis only receiving payment when flights operate. Other variable costs include: inflight passenger refreshments costing $30 per passenger and fuel which costs $800 per flight. Total annual fixed costs are $150,000.

Calculate income and variable costs and contribution margin of each scenic flight.

Calculate the number of scenic flights needed to break even.

Scenic Flights would like to increase current profits by 40 percent. Calculate the number of additional flights required to meet this financial goal.

Discuss whether this increased profit target is realistic under current conditions and possible assumptions and limitations of the cost / volume / profit model at such higher volume levels. (word limit 40)

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