Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 30

Wings Airlines targets budget travelers with its low-cost fares. Assume Wings provides no in-flight service except for meals and beverages that the passengers must pay for. The baggage handling and gate services are fixed costs. What is the lowest price Wings should charge for a ticket?

Step 1 of 2

Fixed costs are costs which does not changes with change in level of production. Variable costs are costs which does changes with change in level of production. Breakeven is point of no profit i.e. where revenue is equal to total costs.