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(Solved): MidCoast Airlines provides charter airplane services. In October, when the company is operating at 6 ...



MidCoast Airlines provides charter airplane services. In October, when the company is operating at 60% of its capacity, it receives a bid from the local college. The college is organizing a trip for a student group. The college budgeted only $54,000 for round-trip airfare. MidCoast Airlines normally charges between $74,000 and $84,000 for such service. MidCoast determines its total cost for the round-trip flight to Washington to be $71,400, which consists of the following. Variable cost$ 39,400Fixed cost32,000Total cost$ 71,400 Although the manager at MidCoast supports the college’s educational efforts, she is struggling to justify accepting only $54,000. (a) What is the contribution margin from accepting the offer? (b) Should the airline accept the $54,000 offer from the college?



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