#1. Product leadership and customer value proposition are definitely Jet Blue’s strategies for success. They pride themselves on low fares and great customer service. They are also focused on bringing low airfares to customers that need low fare options to fly to destinations with high airfares. Jet Blue has been so successful in their strategies that they have the highest percentage of seat capacity utilized. They have certainly created a winning formula.
#2. Jet fuel prices and operating costs are two of the business risks that Jet Blue faces. An example of a control activity the company could implement to reduce these risks is putting into place a contract that puts jet fuel at a fixed price for a certain amount of time. In addition, another possible risk is foreign exchange and a contract should be entered to protect their proceeds.
#3. Unit-level activity has costs that are incurred for every single unit that is produced. Batch-level activity has costs that are incurred for each batch that the company is going to produce, no matter if 3 or 30 units are being produced. At this level, the cost drivers will be volume-based since the amount of activity will proportionally depend on the number of units produced. For example, for Friends Company, a manufacturer of valves, the unit-level activities include inserting piston into piston valves, inspecting each unit, and providing power to run processing equipment.
#4. Activities involving a batch of products—as opposed to individual items. Traditionally, in a job order cost system and process cost system, overhead is allocated to a job or function based on direct labor hours, machine hours, or direct labor dollars. Examples of batch-level activities are: placing purchase orders, setting up machines (i.e. per batch and not per individual product), conducting inspections by batch, arranging for deliveries to