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2 January, 10:16

Economics Airlines currently spends $20,000 per month in airport fees and $10,000 per flight for fuel, crew, and airplane maintenance. Economics Airlines currently offers 5 flights from State College to Detroit and is considering offering a 6th. If each seat ticket costs $500, how many customers must fly on the 6th flight in order for Economics Airlines to be willing to run it?

a. 60

b. 20

c. 10

d. 40

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Answers (1)
  1. 2 January, 10:45
    0
    b. 20

    Explanation:

    For 5 flights per month

    Total Cost = Variable cost + Fixed cost

    Total Cost = Fuel, crew, and airplane maintenance cost + Airport fee

    Total Cost = (5 X 10000) + 20,000 = $70,000

    For 6 flights per month

    Total Cost = Variable cost + Fixed cost

    Total Cost = Fuel, crew, and airplane maintenance cost + Airport fee

    Total Cost = (6 X 10000) + 20,000 = $80,000

    Additional Cost for 6th flight = $80000-70,000 = $10,000

    Minimum No. of Passenger to cover the cost = Additional cost / Ticket price per seat

    Minimum No. of Passenger to cover the cost = $10,000 / $500 = 20 seats passengers.
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