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4.4: Accounting in the Headlines

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What are potential cost drivers for an ABC system at Virgin America?

The following table contains selected financial and other data for Virgin America for 2012.

Virgin America

Selected financial data

For Twelve Months Ended December 31, 2012

Partial income statement: (000s omitted)
Operating revenues $ 1,332,837
Other expenses:
Aircraft fuel 537,501
Aircraft rent 221,275
Wages and salaries 176,216
Aircraft maintenance 74,459
Landing fees 110,165
Sales and marketing 107,136
Guest services 50,448
Depreciation 11,260
Other 76,110
Total operating expenses $ 1,364,570
Operating income/loss $ (31,733)
Selected data:
Available seat miles (millions) 12,545
Departures 56,362
Aircraft in service 51
Guests (thousands) 6,219
Load factor (% of seats filled)

79.0%

Fuel gallons consumed (thousands) 161,404

Financial data source here.

Questions

  1. For each of the expenses listed in the income statement, select a cost driver from the drivers listed under “Selected data.” Provide rationale for your choice of each of the drivers.
  2. Are there any expenses you would group together into a single pool? Why or why not?
  3. How could Virgin America use these cost pools and activity-based costing information internally?
CC licensed content, Specific attribution

4.4: Accounting in the Headlines is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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