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?

Question

Quizplus · Accepted Answer

Terminal depreciation (based on square footage) and the allocated Coastal administrative overhead costs are unavoidable as they are fixed costs that will be incurred regardless of whether the Emerald Club is closed or not. The other costs, receptionist and supervisory salaries, catering, and airport fees (computed as a percentage of club revenue) are variable costs that can potentially be avoided if the club is closed. Therefore, options A, B, and C are incorrect.

Coastal Airlines Has a Significant Presence at the San Jose