Question

Benson Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company Never-Fail, Inc. Never-Fail is a multimillion-dollar company started by Wes Never immediately after he failed to finish his first accounting course. The company’s motto is “We Never-Fail to Deliver Your Package on Time.” When Never-Fail has more freight than it can deliver, it pays Benson to carry the excess. Benson contracts with independent pilots to fly its planes on a per-trip basis. Benson recently purchased an airplane that cost the company $6,175,000. The plane has an estimated useful life of 24,700,000 miles and a zero salvage value. During the first week in January, Benson flew two trips. The first trip was a round-trip flight from Chicago to San Francisco, for which Benson paid $300 for the pilot and $250 for fuel. The second flight was a round trip from Chicago to New York. For this trip, it paid $250 for the pilot and $125 for fuel. The round trip between Chicago and San Francisco is approximately 4,900 miles and the round trip between Chicago and New York is 1,300 miles.

1. Determine the total cost of each trip.

	Chicago to San Francisco Chicago to New York Total cost

Answer 1

	Answer
	Total cost of each trip is as calculated below:
	Depreciation per mile is	6,175,000/24,700,000
		0.25
	Trip 1
	Pilot Cost	$                                     300
	Fuel Cost	$                                     250
	Depreciation Cost (0.25*4,900)	$                                  1,225
	Total Cost	$                                  1,775
	Trip 2
	Pilot Cost	$                                     250
	Fuel Cost	$                                     125
	Depreciation Cost (0.25*1,300)	$                                     325
	Total Cost	$                                     700
	Chicago to San Francisco	Chicago to New York
Total cost	$                                     1,175	$                                     700