Second City Airlines operates 35 scheduled round-trip flightseach week between New York and Chicago. It charges a fixed one-wayfare of $200 per passenger. Second City Airlines can carry 150passengers per one-way flight. Fuel and other flight-related costsare $5,000 per flight. On-flight meal and refreshment cost average$5 per passenger. Flight crew, ground crew, advertising, andother administrative expenditures for the New York-to Chicago routeamount to $400,000 each week.
Required:
How many passengers must each of the 70 one-way flights have on average to break even each week?
If the load factor is 60% on all flights (that is, the flightsare 60% full), how many flights must Second City Airlines operateon this route to earn a total profit of $500,000 per week?
Are fuel costs variable or fixed?
What is the variable cost to Second City Airlines for one additional passenger on a flight if the passenger takes a seat thatwould otherwise go empty?