Operating Income of a One-Way Research Proposal

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The variable costs per flight will be $788 for the food, and $6,402.50 for the commissions. Thus, Westcoast will lose $24,665.5 for each of their own flights.

For the chartered flights, Westcoast will earn $75,000, plus the fuel costs of $14,000 and the food costs. The $75,000 is then applied to the $67,500, and Westcoast will gain $7,500 per chartered flight. On purely financial considerations, the charter deal will give Westcoast more customers per flight on their own flights, and will allow them to operate some flights profitably.

However, there are other considerations that would impact this decision. The company is losing money -- a lot of it -- on every one of its own flights.

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The current load factor is just 46%. This indicates that the best course of action might be to break lease on one of the two planes. This would allow the company to nearly fill all of its flights. In doing this, Westcoast could make more money than if they chartered. The profit for a charter flight is $7,500. If the company put 350 passengers on every flight, it would make the following on each flight:

(325) [HIDDEN] = $113,750 -- 81,500 - $1,400 - $11,375 = $19,475

Given these figures, the best course of action for Westcoast is to drop one plane and fly one round-trip per.....

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