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Decision Making Assignment | Situational Analysis

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Added on  2020-05-16

Decision Making Assignment | Situational Analysis

   Added on 2020-05-16

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Running Head: Situational Analysis in Decision MakingManagement Accounting
Decision Making Assignment | Situational Analysis_1
Situational Analysis in Decision Making 1Situation 3IntroductionFlying Airlines has been approached by the Japanese Tourist Agency for obtaining the special chartered flight for the tourism purpose. To accept the offer, the company will have toevaluate the profitability of this special offer. Apart from the financial results of the offer, other factors may also be considered by the company. The tourist agency is ready to pay $ 160000 for the chartered file to the Flying Company. But, in that case the company will not have any cargo revenue. However, the variable costs will be reduced by $5000.In case where there is space capacity available with the company following analysis can be undertaken on financial ground: Offer price (Revenue) $ 1,60,000.00 Less Revised Variable cost $ 85,000.00 $ 75,000.00 Less Lost cargo revenue $ 30,000.00 Net benefit from special offer $ 45,000.00 Note: The allocated fixed cost is irrelevant in the decision making as it will be incurred in either cases whether the spare capacity is utilised or not (Zimmerman & Yahya-Zadeh, 2011).Conclusion: On the basis of above calculation it can be observed that even if there is a loss ofrevenue the flying airlines company will be benefited. There will be a profit of $45000 if the
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