Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, t

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Profits have been decreasing for several years at PegasusAirlines. In an effort to improve the company’s performance, thecompany is thinking about dropping several flights that appear tobe 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 flight482:
Members of the flight crew are paid fixed annual salaries,whereas the flight assistants are paid based on the number of roundtrips they complete.
One-third of the liability insurance is a special chargeassessed against flight 482 because in the opinion of the insurancecompany, the destination of the flight is in a “high-risk” area.The remaining two-thirds would be unaffected by a decision to dropflight 482.
The baggage loading and flight preparation expense is anallocation of ground crews’ salaries and depreciation of groundequipment. Dropping flight 482 would have no effect on thecompany’s total baggage loading and flight preparationexpenses.
If flight 482 is dropped, Pegasus Airlines has no authorizationat 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 reducethe number of aircraft in its fleet or the number of flight crew onits payroll.