Name: Adelson B. Arado ID No.

: 190000002087

Subject: Quantitative Techniques in Business Date: August 03, 2019

Aviation Unlimited

I. Summary

Aviation Unlimited is an airfreight carrier servicing the western region of the United States.
It has 100 airplanes, 200 pilots, 20 ground crews of 10 workers per crew, and 150 administrators and
other office personnel. T.T. Greedy, Aviation’s chief accountant, has prepared a summary report of
estimated expenses for the next quarter of operations, as shown in Table 6.7.

Aviation classifies its flights in either of two routes: long haul or short haul. Al transport,
Aviation’s transportation engineer, has provided data on estimated tonnage and revenues for each
of the route types. These data appear in Table 6.8. Hy flyer, Aviation’s president asked to provide a
management report to, containing the following information:

1. The number of each type of flight per quarter that will enable Aviation to maximize its total
contribution to profit (revenue less variable cost)
2. The resulting profit contribution
3. The influence of fixed costs on the recommendation

In the report, it is important that the outline procedure used in formulating the
recommendation in a way that is understandable to Flyer. President Flyer is not interested in linear
programming jargon, only in an intuitively appealing explanation of the recommendation.

Table 6.7 Estimated Expenses for Aviation

Item Amount

Total fixes costs $18,000,000

Administrative 1,500,000
Airplane maintenance 15,000,000
Pilot’s salaries 1,500,000
Total variable costs per average flight $6,000
Fuel 4,000
Ground personnel 2,000

Table 6.8 Estimated Tonnage and revenues for aviation

Route Revenue per Tonnage Gallons of Fuel Ground Crew

average Flight Hours
Long haul $9,500 10 5,000 6
Short haul $8,500 30 3,000 4
Maximum available 450,000 75,000,000 96,000
per quarter
II. Relate the case to any of the chapter we discussed.

In the case it involves selecting between two (2) alternative flight classes and or combining
both, with the objective of maximizing revenue, margin of contribution, and profit. The company's
resources and assets are also restricted and subject to constraints as shown below:

Route Revenue per Tonnage Gallons of Fuel Ground Crew

average Flight Hours
Long haul $9,500 10 5,000 6
Short haul $8,500 30 3,000 4
Maximum available 450,000 75,000,000 96,000
per quarter

As described with the details of the case above even the president is not interested using
Linear programming jargon, I concluded and really obvious that the case to be related to Linear
programming using equation technique in finding out the best mix that will lead to maximum
profitability.

III. Identify and diagnose the problem:

 Did they have enough information and the incentive to make a good decision?

Yes. Al transport the aviation’s transportation engineer, has provided data on estimated
tonnage and revenues for each of the route types which is the long haul and short haul, data
provided was very helpful in determining the variables which directly affect the profitability of
every alternative or its combination to be chosen.

The issue is that the firm is undecided between classes of flight, which is the long haul
and short haul. The President will decide which of the two aircraft classes or exactly the mixture
of the two that will produce high productivity and cover the company's fixed costs, rooting from
the following demands:

1. The number of each type of flight per quarter that will enable Aviation to maximize its total
contribution to profit (revenue less variable cost)

2. The resulting profit contribution

3. The influence of fixed costs on the recommendation

Another problem of the case is in the way the solution should be presented to the
president, since he is requiring to have the presentation which is easily understandable and is
minimally (or completely) devoid of linear programming jargons.
 IV. Present a methodology for diagnosing and repairing problem.

For me, the best way/method that need to perform in the case is by using linear
programming equation technique to fix the issue, an extensive and simple way of presenting the
solution should also be performed, which is easy to comprehend. With this, it is suggested to
incorporate the concept of linear programming in which the solution will be computed and
presented below.

9,500 Long Haul + 8,500 Short Haul = Maximum Revenue

Limitations: 10 Long Haul + 30 Short Haul = 450,000

5,000 Long Haul + 3,000 Short Haul = 75,000,000
6 Long Haul + 4 Short Haul = 96,000
Long Haul, Short Haul > 0

5,000 Long Haul + 3,000 Short Haul = 75,000,000

[16 Long Haul + 34 Short Haul = 546,000] -312.50

5,000 Long Haul + 3,000 Short Haul = 75,000,000

- 5,000 Long Haul - 10,625 Short Haul = - 170,625,000
- 7, 625 Short Haul = - 95,625,000
Short Haul = - 95,625,000 / -7,625
Short Haul = - 95,625,000 / -7,625
Short Haul = 12,541

5,000 Long Haul + 3,000 Short Haul = 75,000,000

5,000 Long Haul + 3,000 (12,540.98) = 75,000,000
5,000 Long Haul + 37,622,940 = 75,000,000
5,000 Long Haul = 75,000,000 - 37,622,940
5,000 Long Haul = 37,377,060
Long Haul = 37,377,060 / 5,000
Long Haul = 7,475

Maximum Revenue = 9,500 Long Haul + 8,500 Short Haul

Maximum Revenue = 9,500 (7,475) + 8,500 (12,541)
Maximum Revenue = 71,012,500 + 106,598,500
Maximum Revenue = 177,611,000

Contribution Margin = Revenue – Variable Cost

CM = 177,611,000 – [(7,475 x 4,000) + (12,541 x 4,000) + (7,475 x 2,000) + (12,541 x 2,000)]
Cm = 177,611,000 – [(29,900,000 + 50,164,000 + 14,950,000 + 25,082,000)]
CM = 177,611,000 – 120,096,000
Contribution Margin = 57,515,000

Profit = Contribution Margin – Fixed Cost

Profit = 57,515,000 – 18,000,000
Profit = 39,515,000
V. What strategies or principles highlighted?
VI. Discuss the general impact of the case to you as an MBA student.

As a MBA student the impact to me this case that you can really utilize your knowledge
in linear programming and other accounting related topics. This will help you measures your
knowledge in college and apply it to this subject.