Coastal Airlines has a significant presence at the San Jose International Airport and therefore operates the Emerald Club, which is across from gate 36 in terminal 1. The Emerald Club provides food and business services for the company's frequent flyers. Consider the following selected costs of Club operation:
1) Receptionist and supervisory salaries
2) Catering
3) Terminal depreciation (based on square footage)
4) Airport fees (computed as a percentage of club revenue)
5) Allocated Coastal administrative overhead
Management is exploring whether to close the club and expand the seating area for gate 36. Which of the preceding expenses would the airline classify as unavoidable?
A) 3.
B) 4.
C) 5.
D) 3, 5.
E) None of the answers are correct.

Question

Quizplus · Accepted Answer

Depreciation based on square footage is an unavoidable cost as it is a non-cash expense that represents the wear and tear of the physical asset over its useful life. Allocated Coastal administrative overhead is also an unavoidable cost as it is a shared expense that cannot be directly traced to a specific cost center. Therefore, the airline would classify expenses 3 and 5 as unavoidable.

Coastal Airlines Has a Significant Presence at the San Jose