Wk 4 DQ 2 - The disadvantage to selling the seats at a...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Imagine Widgets Airlines, Inc. operates 18-seat commercial flights between New York City and Washington, DC. After 10 seats have been sold on each aircraft, the company has reached the break-even point. Should Widgets consider offering a discounted fare for seats 11 through 18? What are the advantages and disadvantages of not offering a discount on seats 11 through 18? What are the advantages and disadvantages of offering a discount on seats 11 through 18? How would you decide how much of a discount, if any, could be offered? What effect would the discount have on the financial statements of Widgets Airlines, Inc.? If the seats are not selling quickly enough to ensure the flight will be full then Widgets Airlines should offer the remaining seats at a discount. The advantage to selling the seats at a discount is that they should sell quickly.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: The disadvantage to selling the seats at a discounted rate is that others who have already purchased seats at a higher price may be unhappy with the fact that they could have gotten the seats cheaper. Also a disadvantage is that Widgets might be able to sell the seats at full fare and earn a higher profit. I would try a 10 to 20 percent discount to start in order to still try and earn more revenue. However, the close to flight time the more of a discount I would offer to ensure the plane was full. Regardless of whether seats 11 through18 are sold the flight still has to take place and the same fixed costs will be incurred. So if seats 11-18 do not get sold Widgets will breakeven which mean no profit will be earned. If the other seats are sold whether it is at full price or at a discounted price Widgets will earn a profit....
View Full Document

Ask a homework question - tutors are online