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    Relevant Costing

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    I am having major difficulties understanding the assignment that is pasted below. If someone could help me compile some initial work (in APA format) of the details down at the bottom, that would be great. I could understand the lesson more thoroughly.

    Thank you to the OTA who can assist me.

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    Relevant Costing Problems
    Westcost Air Co. leases a single jet aircraft and operates between San Francisco and the Fiji. Flights leave San Francisco on Mondays and Thursdays and depart from Fiji on Wednesdays and Saturdays. Westcost Air Co. cannot offer any more flights between San Francisco and Fiji. Only tourist-class seats are available on its planes. An analyst has collected the following information:
    Seating capacity per plane 380 passengers
    Average number of passengers per flight 175 passengers
    Flights per week 4 flights
    Flights per year 208 flights
    Average one-way fare $325
    Variable fuel costs $14,000 per flight
    Food and beverage service costs/passenger $4 per
    Commission to travel agents paid by Air Frisco 10% of fare
    (all tickets are booked by travel agents)
    Fixed annual lease costs allocated to each flight $53,000 per flight
    Fixed ground services (maintenance, check in,
    baggage handling) costs allocated to each flight $7,500 per flight
    Fixed flight crew salaries allocated to each flight $7,000 per flight

    Required:
    1. Calculate the operating income that Westcoast Air earns on each one-way flight between San Francisco and Fiji.

    2. The Market Research Department of Westcoast Air indicates that lowering the average one-way fare to $280 will increase the average number of passengers per flight to 212. Should the company lower its fare? Show your calculations.

    3. Travel International, a tour operator, approaches Westcoast Air on the possibility of chartering (renting out) its jet aircraft twice each month, first to take Travel International's tourists from San Francisco to Fiji and then to bring the tourists back from Fiji to San Francisco. If Westcoast Air accepts Travel International's offer, Westcoast Air will be able to offer only 184 (208 - 24) of its own flights each year. The terms of the charter are as follows: (a) For each one-way flight, Travel International will pay Westcoast Air $75,000 to charter the plane and to use its flight crew and ground service staff; (b) Travel International will pay for fuel costs; and (c) Travel International will pay for all food costs. On purely financial considerations, should Westcost Air accept Travel International's offer? Show your calculations. What other factors should the company consider in deciding whether or not to charter its plane to Travel International?

    Modular Case Assignment Expectations:
    Summarize your findings in a report which answers the above questions. The submission should be 2 to 4 pages and need to include income statements and other computations in good format as well as a discussion interpreting the analysis. Answer all questions and include references in APA format.

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    https://brainmass.com/business/relevant-costing-and-short-run-decision-making/relevant-costing-321872

    Solution Preview

    Relevant Costing Problems
    Westcost Air Co. leases a single jet aircraft and operates between San Francisco and the Fiji. Flights leave San Francisco on Mondays and Thursdays and depart from Fiji on Wednesdays and Saturdays. Westcost Air Co. cannot offer any more flights between San Francisco and Fiji. Only tourist-class seats are available on its planes. An analyst has collected the following information:
    Seating capacity per plane 380 passengers
    Average number of passengers per flight 175 passengers
    Flights per week 4 flights
    Flights per year 208 flights
    Average one-way fare $325
    Variable fuel costs $14,000 per flight
    Food and beverage service costs/passenger $4 per
    Commission to travel agents paid by Air Frisco 10% of fare
    (all tickets are booked by travel agents)
    Fixed annual lease costs allocated to each flight $53,000 per flight
    Fixed ground services (maintenance, check in,
    baggage handling) costs allocated to each flight $7,500 per flight
    Fixed flight crew salaries allocated to each flight $7,000 per flight

    Required:
    1. Calculate the operating income that Westcoast Air earns on each ...

    Solution Summary

    The solution explains the use of relevant cost in making decisions

    $2.19