What is the average before tax profit of a round trip flight

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Reference no: EM131213337

Michael Bordellet is the owner/pilot of Bordellet Air Service. The company flies a daily round trip from Seattle's Lake Union to a resort in Canada. In 2016, the company reported an annual income before taxes of $120,403, although that included a deduction of $70,000, reflecting Michael's salary. Revenue ( $360 x 1,560 passengers = $561,600 Less costs: Pilot (owner's salary) $70,000 Fuel (35,657 gallons x $4.25) $ 147,977 Maintenance (variable) $127,920 Depreciation of plane 25,000 Depreciation of off equip 2,800 Rent exp 40,000 Insurance 20,000 Miscellaneous(Fixed) 7,500 Income before taxes $120,403 Revenue of $561,000 reflects six round trips per week for 52 weeks with an average of five passengers paying $360 per round trip (6x52x5x$360 = $561,600). The flight to the resort is 400 miles one way. With 312 round trip (6 per week x 52 weeks), that amounts to 249,600 miles. The Plane averages 7 miles per gallon. a. How many round trips is Michael currently flying, and how many round trips are needed to break even? b. How many round trips are needed so that michael can draw a salary of $110,000 and still not show a loss? c. What is the average before tax profit of a round trip flight in 2016? d. What is the incremental profit associated with adding a round-trip flight?

Reference no: EM131213337

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