JetTaxi is a passenger airplane line that contracts with larger, well-known lines to provide transportation across the United States. JetTaxi owns 25 aircraft, and currently has contracts for 17 of those aircraft. The other lines pay JetTaxi $2,500,000 per year to provide carrier services for their passengers.
JetTaxi is considering a new contract where they would provide 5 airplanes to a new company for $1,800,000 per year, per plane. Each JetTaxi plane incurs yearly costs of $600,000 for labor, $200,000 for fuel, $400,000 in fixed overhead, and $800,000 in variable overhead.
What would be the differential gain or loss on this contract?

Question

JetTaxi is a passenger airplane line that contracts with larger, well-known lines to provide transportation across the United States. JetTaxi owns 25 aircraft, and currently has contracts for 17 of those aircraft. The other lines pay JetTaxi $2,500,000 per year to provide carrier services for their passengers. 
JetTaxi is considering a new contract where they would provide 5 airplanes to a new company for $1,800,000 per year, per plane. Each JetTaxi plane incurs yearly costs of $600,000 for labor, $200,000 for fuel, $400,000 in fixed overhead, and $800,000 in variable overhead.
What would be the differential gain or loss on this contract?

Quizplus · Accepted Answer

The Answer of JetTaxi is a passenger airplane line that contracts with larger, well-known lines to provide transportation across the United States. JetTaxi owns 25 aircraft, and currently has contracts for 17 of those aircraft. The other lines pay JetTaxi $2,500,000 per year to provide carrier services for their passengers. 
JetTaxi is considering a new contract where they would provide 5 airplanes to a new company for $1,800,000 per year, per plane. Each JetTaxi plane incurs yearly costs of $600,000 for labor, $200,000 for fuel, $400,000 in fixed overhead, and $800,000 in variable overhead.
What would be the differential gain or loss on this contract?

JetTaxi Is a Passenger Airplane Line That Contracts with Larger