EB7.

LO 2.2Case Airlines provides charter airline services. The fixed expenses to operate the company’s aircraft are $377,300 in January and $378,880 in February. It costs Case Airlines $0.45 per mile in variable costs. In January, Case aircraft flew a total of 385,000 miles, and in February, Case aircraft flew a total of 296,000 miles. Using this information, answer the following:

What were the total costs to operate the aircraft in January and February, respectively?

What were the total costs per mile to operate the fleet in January and February, respectively?

(a) $550,550; $512,080

(b) $1.43 per mile; $1.73 per mile

Explanation:

(a) January:

Total cost to operate the aircraft:

= Fixed cost + Variable cost

= $377,300 + ($0.45 * 385,000 miles)

= $377,300 + $173,250

= $550,550

February:

Total cost to operate the aircraft:

= Fixed cost + Variable cost

= $378,880 + ($0.45 * 296,000 miles)

= $378,880 + $133,200

= $512,080

(b)

Total costs per mile to operate the fleet in January:

= Total cost in January : Miles flew in January

= $550,550 : 385,000

= $1.43 per mile

Total costs per mile to operate the fleet in February:

= Total cost in February : Miles flew in February

= $512,080 : 296,000

= $1.73 per mile