Jarmon Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company Never-Fail is a multimillion-dollar company started by Peter 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 Jarmon to carry the excess. Jarmon contracts with independent pilots to fly its planes on a per trip basis. Jarmon recently purchased an airplane that costs the company $24,000.000. The plane has an estimated useful life of 100,000.000 miles and a zero salvage value. During the first week in January, Jarmon flew two trips. The first trip was a round trip flight from Chicago to San Francisco, for which Jarmon paid $500 for the pilot and $350 fuel. The second Flight was a round trip between Chicago and New York is 1,600 miles.
a) Identify the direct and indirect cost that Jarmon incurs for each trip.
b) Determine the total cost of each trip.
c) In addition to depreciation, identify three other indirect costs that may need to be allocated to determine the cost of each trip.
This question was answered on: Sep 16, 2020
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