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Business LibreTexts

4.3: Accounting in the Headlines

  • Page ID
    10607
  • 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?