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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