a) What is the distinction between marginal cost and incremental cost?
b) How are sunk costs treated in managerial decision making? Why?
Discussion Question 10: What are the aim, usefulness, and shortcomings of
a) Cost-volume-profit analysis and b) The concept of operating leverage?
Problem 3: Airway Express has an evening flight from LA to NY with an average of 80 passengers and a return flight the next afternoon with an average of 50 passengers. The plane makes no other trip. The charge for the plane remaining in NY overnight is $ 1,200 and would be zero in LA. The airline is contemplating eliminating the night flight out of LA and replacing it with a morning flight. The estimated number of passengers is 70 in the morning and 50 in the return afternoon flight. The one-way ticket for any flight is $ 200. The operating cost of the plane for each flight is $ 11,000. The fixed cost for the plane is $ 3,000 per day whether it flies or not.
a) Should the airline replace its night from LA with a morning flight? b) Should the airline remain in business?
Problem 11: The Goldberg- Scheinman Publishing Company is publishing a new managerial economics text for which it has estimated the following total fixed and average variable costs.
Total fixed costs: Copy editing Typesetting Selling and promotion 10,000