exam - Q1 Name: Q2 Student Number: Q3 Q4 YORK UNIVERSITY...

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Q1 Name: Q2 Student Number: Q3 Q4 YORK UNIVERSITY Q5___ Atkinson College T ADMS2510 3.0 Final Examination, May 15, 2001, 7:00 to 10:00 pm Instructors: Alison Beavis, Larry Blair, Rod McTaggart, Gary Spraakman Instructions a. This is a closed book examination and no collaboration is allowed. b. There are 100 marks and five compulsory questions worth 20 marks each. c. Put your name and student number at the top of this page. d. Answer each question on the examination paper, and on the back of a page if necessary. e. You may write with a pencil or a pen. f. Place photo identification on your desk during the examination to facilitate verification. Question 1 (20 marks - 36 minutes) Air Pacific owns a single jet aircraft and operates between Vancouver and the Hawaiian Islands. Flights leave Vancouver on Mondays and Thursdays and depart from Hawaii on Wednesdays and Saturdays. Air Pacific cannot offer any more flights between Vancouver and Hawaii. Only tourist-class seats are available on its planes. An analyst has collected the following information: Seating capacity per plane 360 passengers Average number of passengers per flight 200 passengers Flights per week 4 flights Flights per year 208 flights Variable fuel costs $14,000 per flight Food and beverage service cost (No charge to passenger) $20 per passenger Commission to travel agents paid by Air Pacific (All tickets are booked by travel agents) 8% of fare Fixed annual lease costs allocated to each flight $53,000 per flight Fixed ground services (maintenance, check-in, baggage handling) cost allocated to each flight $7,000 per flight Fixed flight crew salaries allocated to each flight $4,000 per flight For simplicity, assume that fuel costs are unaffected by the actual number of passengers on a flight. REQUIRED a) What is the operating income that Air Pacific makes on each one-way flight between Vancouver and Hawaii?
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2 2 Question 1 - continued b) The market research department of Air Pacific indicates that lowering the average one-way fare to $480 will increase the average number of passengers per flight to 212. Should Air Pacific lower its fare? c) Travel International, a tour operator, approaches Air Pacific on the possibility of chartering (renting out) its jet aircraft twice each month, first to take Travel International’s tourists from Vancouver to Hawaii and then to bring the tourists back from Hawaii to Vancouver. If Air
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exam - Q1 Name: Q2 Student Number: Q3 Q4 YORK UNIVERSITY...

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