Case Study:
In a government report in 2012, it was estimated that Air Force One costs the tazpayers $179,750 per hour. Air Force One is a custom-built Boeing 747 for the presidents use while in office. While the president is in office, the president is required by law to use Air Force One for all air travel.
The 747 used for Air Force One has 4,000 square feet of space inside on three levels. In addition to having a large office and a conference room, the plane also houses a medical suite and a doctor. The doctor is permanently assigned to Air Force One. The plane has two food preparation galleys that can feed 100 people at a time. THere are also quarters on the plane for those people who travel with the president, including senior adivsors, Secret Service and the press. In addition, several cargo jets typically are used to carry extra provisions, people and equipment.
The $179,750 cost per hour estimate includes fuel, maintenance, engineering support, repairs, food and lodging for the piolts and crew, and other costs. It also includes the cost of military staffing for the onboard communications euipment. The cost may also inlcude the costs of flying extra aircraft and costs of advance scouting trips to the desitnation to make sure that everything goes as planned.
When Air Force One is used for offical business, the taxpayers must pay for the traveling costs for the president's immediate family, Secret Service detail, and the White House staff who are traveling with the president.
When Air Force One is used for political purposes, the president's campaign fund is required to reimburse the government for the cost of food, lodging, and other related expenses. The campaign fund must alos reimburse the government for the amount that is the equivalent of airforce that would have been paid if a commercial airline had been used. The same reimbursement policy is in effect for trips that categorized as personal trips; the president must reimburse the government for the cost of food, lodging, comparable airfare, and other related expenses.
Q1) Is the $179,750 cost per hour a fixed, variable, or mixed cost? Explain.
Q2.) Exact details about the cost composition of the Air Force One travel are kept secret to protect the president. Use your imagination, and the reading above, to make a list of the costs that you think might be included in the $179,750 per hour cost estimate.
Q3.) Categorized each cost in your list as fixed, variable, or mixed.
Q4.) The number of trips taken by the president in any given year flucates and is dependent upon the political climate, crises, economics, and the like. How useful to you think this cost per hour is?
Q5.) What purpose(s) can the $179,759 cost per hour be used for? Are there any purposes for which that cost is not representative of that "true" cost?
Q6.) Can you think of a better way to represent/ communicate the cost of Air Force One?
Q7.) Do you think the reimbursement policy is fair to the president? Why or why not?
Q8.) Do you think the reimbursement policy is fair to the taxpayers? Why or why not?
Provide complete and step by step solution for the question and show calculations and use formulas.