Scenario 15-6 An Airline Knows That There Are Two Types of Travelers

question 146

Multiple Choice

Scenario 15-6
An airline knows that there are two types of travelers: business travelers and vacationers.For a particular flight,there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket.There are 150 seats available on the plane.Suppose the cost to the airline of providing the flight is $20,000,which includes the cost of the pilots,flight attendants,fuel,etc.
-Refer to Scenario 15-6.How much profit will the airline earn if it sets the price of a ticket at $600?

• A) -$5,000
• B) $15,000
• C) $40,000
• D) $60,000

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Definitions:

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs attributed to variations in production volume.

Gross Profit

The financial difference between revenue and the cost of goods sold before other expenses are deducted.

Fixed Factory Overhead Rate

A predetermined rate used to allocate fixed overhead costs to produced goods based on a consistent basis, such as labor hours or machine hours.

Fixed Factory Overhead Volume Variance

A measure used in cost accounting to determine the difference between the budgeted and actual volume of production, affecting the allocation of fixed overhead costs.