Question

PLEASE EXPLAIN STEP BY STEP - THANK YOU

Falcon Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company On Time, Inc. When On Time has more freight than it can deliver, it pays Falcon to carry the excess. Falcon contracts with independent pilots to fly its planes on a per-trip basis. Falcon recently purchased an airplane that cost the company $7,500,000. The plane has an estimated useful life of 15,000,000 miles and a zero salvage value. During the first week in January, Falcon flew two trips. The first trip was a round-trip flight from Chicago to San Francisco, for which Falcon paid $400 for the pilot and $600 for fuel. The second flight was a round-trip from Chicago to New York. For this trip, it paid $225 for the pilot and $245 for fuel. The round-trip between Chicago and San Francisco is approximately 4,400 miles and the round-trip between Chicago and New York is 1,600 miles. Compute the total costs for each trip:

	Chicago-San Francisco	Chicago-New York
Direct costs
Indirect costs
Total

Answer 1

Computation of Total Cost
Particular	Chicago-San Franciso	Chicago-New York
Direct Cost :
Salary paid to pilot	$ 400	$ 225
Fuel Cost	$ 600	$ 245
Indirect Cost
Recovery of Cost of Airplane	$ 2,200	$ 800
	( $ 7,500,000 x 4,400 miles )	( $ 7,500,000 x 1,600 miles )
	(15,000,000 miles)	(15,000,000 miles)
Total Cost	$ 3,200	$ 1,270
Cost of airplane will be a indirect cost and will be charged of on on the basis of
miles run on the route.