Replacement of Old Loader with New Loader

Particulars Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Not replacing Old loader
Depreciation	$ 25,000
Write off Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	0
Proceeds from sale	0
Depreciation of new loader	0
Operating costs	$ 80,000
Total	$ 105,000

Particulars	Replacing Old loader
Write off	$ 25,000
Proceeds from sale	$ (5,000)
Depreciation of new loader	$ 20,000
Operating costs	$ 50,000
Total	$ 90,000

Particulars	Differential cost
Write off	0
Proceeds from sale	$ 5,000
Depreciation of new loader	$ (20,000)
Operating costs	$ 30,000
Total	$ 15,000

From the overall evaluation of above table relevant differential cost could be identified, which might help in detecting financial performance of the company by implementing new loader. The use of old loader could directly increase the cost to 105,000 per year, while the implementation of new loader would decrease the cost to 90,000. This could eventually help in generating higher revenue for the company if new loader is implemented. The differential cost directly helps in identifying the reduced operating cost, which might help in generating higher revenue for the organisation. Ax and Greve (2017) stated that use of relevant measures of differential analysis directly helps in detecting measures, which could help in improving financial performance of the company. Therefore, from the evaluation it could be understood that the company must implement the new loader and not wait for next year, as they could save up cost of $15,000 from the decision.

Hence, the Flying Airlines could use the new loader, as it substantially reduces operation cost of the organisation and allow them to generate higher revenue. This new loader will depreciate in the current year, which does not raise the cost substantially to match the current operating expenses incurred by the organisation. Therefore, it could be assumed that a financial boost in income of the organisation could be witnessed from the implementation of new loader in the loading process. Suomala, Lyly-Yrjänäinen and Lukka (2014) mentioned that incorporation of depreciation in the calculation is essential, as the organisation is able to identify actual savings, which will be conducted after tax.

Particulars	Non Stop Route
Passenger revenue	$ 240,000
Cargo revenue	$ 80,000
landing fees in San Francisco
Flight crew cost	$ (2,000)
Fuel	$ (21,000)
Meal	$ (4,000)
Aircraft maintenance	$ (1,000)
Net revenue	$ 292,000

Particulars	With stop route
Passenger revenue	$ 251,000
Cargo revenue	$ 80,000
landing fees in San Francisco	$ (5,000)
Flight crew cost	$ (3,400)
Fuel	$ (26,000)
Meal	$ (4,900)
Aircraft maintenance	$ (1,000)
Net revenue	$ 290,700

Particulars	Differential cost
Passenger revenue	$ (11,000)
Cargo revenue	$ –
landing fees in San Francisco	$ 5,000
Flight crew cost	$ 1,400
Fuel	$ 5,000
Meal	$ 900
Aircraft maintenance	$ –
Net revenue	$ 1,300

From the evaluation of the above table actual revenue generated from the non-stop route and with-stop route could be identified. This could mainly help in identifying the benefits, which could be conducted from an investment. The non-stop route will mainly have higher revenue from investment, as compared to with-stop route. Therefore, from the financial point of view the use of nonstop route is more beneficial, as the revenue from operation is higher by $1,300 when comparted to with-stop route. This directly indicates that the use of nonstop route could allow the organisation in generating higher revenue than stopover flight. Shields (2015) mentioned that use of financial evaluation directly allows the organisation in detecting financial performance of the company.

There is minute difference in the revenue that is generated by the airlines when using the nonstop route. However, under the financial consideration the use of nonstop route is better option for the airline company. This would mainly increase revenue by $1,300, while maintaining the cost incurred by the Airline company.

Evaluation of Flight Routes with and without Stopovers

There are different factors that needs to be evaluated before considering decision for non-route and with-route flights. This could eventually help in detecting financial performance of the organisation and generate higher revenue. The use of Airline maintenance and Cargo revenue does not come under the evaluation of flight route decision, as these are fixed expense, which is needed by the flight company (Cooper, Ezzamel and Qu 2017). The opportunity cost factor can be evaluated by the company, which in turn could depict actual revenue generated from both the flight route. Social and economic factor also needs to be evaluated by the airline company for detecting the financial performance, which could be generate from the flight route.

Particulars	Value
Passenger revenue	$ 250,000
Cargo revenue	$ 30,000
Total revenue	$ 280,000
Variable expenses	$  90,000
Fixed cost	$  80,000
Total expenses	$   170,000
Profit	$  110,000

Particulars	Value
Passenger revenue	$ 160,000.00
Total revenue	$ 160,000.00
Variable expenses	$ 85,000.00
Total expenses	$ 85,000.00
Profit	$ 75,000.00

From the evaluation of the above tables, actual financial performance that will be generated from adoption of tourist charter flight can be identified. This situation directly indicates that spare capacity does not require the additional hanger changers, which could be ignored. Hence, purely on the basis of financial consideration the Flying Airline company can accept the tourist charter flight from Japan to Hawaii. In addition, the cost saving measures mainly reduce variance cost by $5,000, where savings on both reservation and ticketing cost could be identified. This savings could eventually help in reducing the extra cost incurred by the company and boost their profits. Moreover, the acceptance of tourist charter flight from Japan to Hawaii can only be accepted if the fixed cost is constant and idle space is available to the company, which in turn could neglect the actual decline in revenue that is generated from the decision. This could eventually help in supporting the rising expenses incurred from operations. Dekker (2016) mentioned that detection and evaluation of all the cost factor could eventually help in reducing any kind of extra expenses, which is been conducted by the company.

Particulars	Non Stop Trip	With Stop Trip
Passenger revenue	$ 250,000	$  160,000
Cargo revenue	$ 30,000	0
Total revenue	$ 280,000	$  160,000
Variable expenses	$  90,000	$    85,000
Fixed cost	$  80,000	$    80,000
Total expenses	$   170,000	$  165,000
Profit/Loss	$  110,000	$    (5,000)

The above valuation mainly depicts the situation where there is no excess capacity and fixed cost of $80,000 is incurred by the company. This could eventually help in detecting the financial vulnerability of the project, as net loss is incurred from the operation. Hence, if there is no excess capacity the Airline company should reject the special tourist charter offer projected to them. Currently, there are no other factor that needs to be evaluated under the circumstance, as no financial profit can be obtained from the decision (Kotas 2014). In addition, on finance ground the company should reject the offer, as it might weaken its financial condition. Hence, the evaluation of above table mainly represents loss, which will incur by the company if new tourist charter is adopted by the company. The actual income that might be generated by the company is greater than offered price, which is directly hampering profitability generated from operations.

Reference

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