Scenario: RYANAIR, being a low cost ‘No Frills” airlines cannot find it feasible to offer free meals on board . Passengers on board desirous of food need to buy it. Keeping in view the demands of its customers, RYANAIR has recently introduced “ RYAN ECONOMEAL ” sale on board on all its popular destination flights , which is a continental snacks pack with the choice of one soft drink. The trial sale of this economy meal pack is proposed to be made in the first instancon London Spain route which commands heavy traffic.
The production of this refreshment pack has been taken up in collaboration with a company named Cordell Company. RYANAIR executives want to know what are the profits under Absorption Costing and Marginal Costing . Your line manager has provided you with the client’s data for 6 months and wants you to prepare income statement under both Absoprtion Costing and Marginal Costing. Subsequent to that the data is to be interpreted and explained.
The following information is available for the months January to June for the “ RYAN ECONOMEAL ” package .
RYANAIR produces only one product and the budgeted activity is expected to average 150,000 per month .