Jet Green Airways Solution and Explanations
We now describe Jet Green’s cost structure as follows (at least that part of Jet Green’s costs that relate to flights between Minneapolis and Atlanta).

I. Costs that vary strictly with the number of passengers:
Food, beverages and ticket processing $26
Fuel $20
Baggage handling $10
Total $56 per passenger II. Costs that vary strictly with the number of one-way flights Landing and takeoff fees $ 5,000 Flight crew salaries $12,000 Fuel: $2,000 + $9,600 $11,600 Baggage handling $ 5,000 Maintenance $ 6,000 Total $39,600 per flight

III. Costs that vary strictly with the number of aircraft Lease of aircraft $70,000 Maintenance $10,000 Total $80,000 per aircraft per week

IV. Costs that vary strictly with the number of gates Gate rental $8,000 per gate per week

Abstracting from the details contained in the above tabulation, Jet Green’s cost structure can be succinctly described by the following cost equation:

Total cost per week of the Minneapolis/Atlanta segment =
$ (56)(number of passengers flown per week) + (39,600)(number of one-way flights per week)
+ (80,000)(number of aircraft leased per week)
+ (8,000)(number of gates rented per week)
You should interpret the above cost structure as follows. If the number of flights, the number of aircraft, and the number of gates is held fixed, the costs of Jet Green will increase at the rate of $56 for each additional passenger. If the number of passengers, the number of aircraft, and the number of gates is held fixed, costs will increase at the rate of $39,600 per one-way flight, and so on. Of course, beyond a point the number of passengers cannot be increased without adding additional flights, and