Cost Accounting for Service Businesses Essay Example | Topics and Well Written Essays - 500 words

Cost Accounting for Service Businesses - Essay Example The return journey through American Airlines will cost $1,460, which would be a one-stop journey. For the two-stop journey, the fare would be $1,242 by American Airlines. On the other side, the fare for one-stop journey by US Airways would be $1,492 and for the two-stop journey, the fare would be $1,524 (Expedia, 2012). It has been found by the researcher that in the case of American Airlines, the cost is lower for a two-stop return journey than a one-stop return one. However, in the case of US Airways, the fare for a two-stop return journey is higher than a one-stop return one. Moreover, the fare in US Airways is more than the fare of American Airlines. The fare is $32 more in case of US Airways when the one-stop return journey is considered. In case of the two-stop return journey, the fare is $282 more than American Airlines. The fixed costs are the cost which is not dependent on the amount of goods. The company has to incur the cost no matter how much units have sold by the company. The variable costs are the type of costs which are dependent on the goods or services sold (Weygandt, Kimmel, & Kieso, 2009, p.211). The fixed cost in case of Airlines would be the cost of the planes, the cost of the fuel, staff salaries, etc. Airlines are mostly fixed cost based companies. The variable costs are very small like the costs incurred for facilitating the passengers. The unit contribution margin is the amount the company gets against the sale of one unit. Airline companies are generating positive contribution margin from the fares. For an individual passenger, the cost incurred by the company is variable. They have to incur the fixed cost whether the plane is travelling with one passenger or whether the seats are full. However, they have to incur variable costs for the value added services provided to the customers. It has been found from the analysis of the fares of the airlines that American Airlines and US Airways are the two big players in