Question

Rundle 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 Rundle to carry the excess. Rundle contracts with independent pilots to fly its planes on a per-trip basis. Rundle recently purchased an airplane that cost the company $4,864,000. The plane has an estimated useful life of 25,600,000 miles and a zero salvage value. During the first week in January, Rundle flew two trips. The first trip was a round-trip flight from Chicago to San Francisco, for which Rundle paid $350 for the pilot and $300 for fuel. The second flight was a round trip from Chicago to New York. For this trip, it paid $300 for the pilot and $150 for fuel. The round trip between Chicago and San Francisco is approximately 4,500 miles and the round trip between Chicago and New York is 1,800 miles.

Required

1. Select if the costs mentioned below are direct or indirect.

2. Determine the total cost of each trip.

Required

1. Select if the costs mentioned below are direct or indirect.

2. Determine the total cost of each trip.

Complete this question by entering your answers in the tabs below.

Select if the costs mentioned below are direct or indirect.

Pilot
Fuel
Depreciation

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

Select if the costs mentioned below are direct or indirect.

TOTAL COST    CHICAGO TO SF    and CHICAGO TO NY

Answer 1

Answer:-

A.) Select if the costs mentioned below are direct or indirect

Pilot	Direct cost
Fuel	Direct cost
Depreciation	Indirect cost

B.) Determine the total cost of each trip.

	Chicago to SF	Chicago to NY
Total cost	$1,505	$792

Working note:-

	Chicago to SF	Chicago to NY
Pilot cost	$350	$300
Fuel cost	$300	$150
Depreciation	$855	$342
	$1,505	$792

Depreciation per mile = $4,864,000 ÷ 25,600,000

Depreciation per mile = $0.19 per mile

Chicago to SF Depreciation = 4,500 × 0.19 = $855

Chicago to NY Depreciation = 1,800 × 0.19 = $342