Passengers airline needs to book to make profit

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Reference no: EM132107993

ABC airline offers five flights a day between Phoenix and Los Angeles. The ten legs of this schedule, less than an hour each, are scheduled from 6 a.m. to 10 p.m. All are handled by the same aircraft at the same gate. Fixed costs are estimated at $20000 per day. At a marginal cost of $20, average variable cost is estimated at $20 up to 600 passengers. When more than 600 passengers are booked each day, marginal cost increases to $60 per passenger. The aircraft holds 92 passengers, so the maximum capacity for five round-trip flights is 920 passengers per day. The airline charges $99 per passenger each way. Use a spreadsheet to put together a worksheet that looks like the table on lecture slides. For the first column (volume), start with 100 and increase it by 25 on each new row.

(a) What is the best operating level on this route?

(b) What is the minimum number of passengers the airline needs to book to make a profit?

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Reference no: EM132107993

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