Southeastern Airlines\'s daily flight from Alanta to Charlotte uses a Boeing 737
ID: 431779 • Letter: S
Question
Southeastern Airlines's daily flight from Alanta to Charlotte uses a Boeing 737, with all-coach seating for 120 people. In the past, the airline has priced every seat at $138 for the one ay flight. An average of 81 passengers are on each fight The variable cost of a file d seat is S25 Ays an Ea the hew easons manager, nas decided to try a yield revenue approach, with seats priced at $82 for early bookings and at $188 for bookings within 1 woek of the flight. He estimates that the airline will sell 66 seats at the lower price and 36 at the higher price. Variable cost will not change. Total S contribution in the single price approach is (enter your response as a whole number).Explanation / Answer
Single price approach :
Total number of passengers per flight = 81
Contribution margin per seat = $138 - $25 = $113
Total contribution in single price approach
= Contribution margin per seat x Number of passengers
= $113 x 81
= $9153
Two price point approach :
Price per seat for early booking = $82
Corresponding number of seats = 66
Therefore, contribution margin = $82 x 66 = $5412
Price per seat for late booking = $188
Corresponding number of seats = 36
Therefore, contribution margin = $188 x 36 = $6768
Total contribution margin in two point approach = $5412 + $6768 = $12180
Thus, Total contribution margin in proposed two price point model is greater than total contribution margin in current single price point approach