Analyst at Delta Airlines Assignment
As an analyst at Delta Airlines, you are asked to help the operations staff. Operations have identified a new method of loading baggage that is expected to result in a 30 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $6 per bag. Other costs are $5 per bag.
Required: a-1. What differential costs should the operations staff consider the decision to use the new method next year? a-2. What would be the cost savings per bag using it? (Round your answer to 2 decimal places.)
b. How would management use the information in requirement (a) and any other appropriate information to proceed with the contemplated use of the new baggage loading method? Differential costs would not play a significant role in management's decision. Management would make their decision based strictly on the differential costs. Management would use the information, but would also want to know the effect on quality. .
