Submitted by: Submitted by tugboat
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Category: Business and Industry
Date Submitted: 12/23/2010 07:07 AM
For this Session Long Project I am asked to apply what I have learned from our case study on activity, revenue, variable costs, and fixed costs. I will answer these questions for Southwest Airlines and determine the units of measure for each of these. Additionally, I will include the name and nature of the organization, the activity and time period used, the inputs I used, my results, and any implications from my results.
Rollin King and Herb Kelleher started Southwest Airlines in 1971 out of Texas and began service to Dallas, Houston, and San Antonio. Their first year ended with four aircraft and 195 employees and have continued to grow tremendously over the past 37+ years. Six years later Southwest Airlines became available on the New York Stock Exchange as “LUV”. Today, Southwest Airlines is a major airline carrier moving almost 100 million customers to 68 cities and performing over 3,300 flights a day.
The activity I will use for this organization is the price for an airline ticket per person in 2008 according to their financial information from their website www.southwest.com. This will be an average price since it will be difficult to breakdown tickets based on distance of travel, time, etc.
Breakeven Analysis
The following Revenues, passengers carried, and total amounts is factual information from the 2008 consolidated financial data from Southwest Airlines. I made reasonable estimates with regards to variable and fixed costs since the actual amounts for these were not presented.
Operating Revenues –
Passengers $10,549,000,000
Freight 145,000,000
Other 329,000,000
Total Revenues $11,023,000,000
Variable costs for the activity
Accounts payable 524,000,000
Other Operating costs 552,000,000
Contribution Margin $8,785,000,000
Fixed costs
Accrued Liabilities $1,012,000,000
Long term debt $3,498,000,000...