Week 3 - Case Solution : Re-Analyzing the Song Proposal
Now, we explore the role of managerial accounting to support this decision. Submit computations in Excel.
Use the High Low Method to answer these questions
- Estimate the salary cost function for Delta. Despite the fact you can choose between some feasible drivers, please use Revenue Passenger Miles for this part of the case. Use the High Low method.
- Estimate the salary cost function for JetBlue. Use the high low method.
- What conclusion can you make out of the comparison of both cost functions?
Now, let's examine the data using simple linear regression:
- Maybe it is the cost separation method!. Please redo 1 (above) and 2 (above) by using simple linear regression? An attachment with the tables is available for you to use.
- Did the result and conclusions of your analysis change ?
- Can Delta be successful on the new segment? Is the strategy aligned with the microeconomic structure of Delta?
- Some years after Delta's case situation, salaries were no longer the highest cost for Delta. Fuel prices increased dramatically after 2001. How can you deal with this new profitability threat from a cost management perspective? If costs cannot come down, how can we improve the profitability of a firm such as Delta?