Test

Q 7

Profit maximization is whereby all firms want to maximize profit.

Theory of constraints is to find out most effective way to alleviate organisation most limiting constraints. In this case, unprofitable route is the constraints.

Organisation needs information about cost of producing service. Example, United Airlines need to know cost of adding flight to proposed route.

With cost volume profit, airline able to know no of percentage of seat filled up before it break even. Example fly by night need 65% to break even, but unprofitable route only 30% fill up, thus fly by night make a loss.

If this route is not obligated by law, no airline company willing to take up this route as company ultimate goal is to make profit, as route that does not make profit , it will be irrational to take up this route and also difficult to explain to share holders.

It is only by law that airlines willingly to take up unprofitable route, if not by law, there will not be airlines taking up unprofitable route and consumer might have transportation problem. Profit route might have too many airlines taking up thus more supply than demand which causes profit route to be very competitive.

Q 7

Profit maximization is whereby all firms want to maximize profit.

Theory of constraints is to find out most effective way to alleviate organisation most limiting constraints. In this case, unprofitable route is the constraints.

Organisation needs information about cost of producing service. Example, United Airlines need to know cost of adding flight to proposed route.

With cost volume profit, airline able to know no of percentage of seat filled up before it break even. Example fly by night need 65% to break even, but unprofitable route only 30% fill up, thus fly by night make a loss.

If this route is not obligated by law, no airline company willing to take up this route as company ultimate goal is to make profit, as route that does not make profit , it will be...