September 20, 2013 
After several years of losses, Virgin America recently announced that it anticipates a profit for 2013. Although the company is expecting a profit for 2013, it still is not out of the woods. Critics have called for greater cost control at Virgin America.
The following table contains selected financial and other data for Virgin America for 2012.
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Virgin America |
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Selected financial data |
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For Twelve Months Ended December 31, 2012 |
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| Partial income statement: | (000s omitted) |
| Operating revenues | $ 1,332,837 |
| Other expenses: | |
| Aircraft fuel | 537,501 |
| Aircraft rent | 221,275 |
| Wages and salaries | 176,216 |
| Aircraft maintenance | 74,459 |
| Landing fees | 110,165 |
| Sales and marketing | 107,136 |
| Guest services | 50,448 |
| Depreciation | 11,260 |
| Other | 76,110 |
| Total operating expenses | $ 1,364,570 |
| Operating income/loss | $ (31,733) |
| Selected data: | |
| Available seat miles (millions) | 12,545 |
| Departures | 56,362 |
| Aircraft in service |
51 |
| Guests (thousands) | 6,219 |
| Load factor (% of seats filled) |
79.0% |
| Fuel gallons consumed (thousands) |
161,404 |
Financial data source here.
Questions
- For each of the expenses listed in the income statement, select a cost driver from the drivers listed under “Selected data.” Provide rationale for your choice of each of the drivers.
- Are there any expenses you would group together into a single pool? Why or why not?
- How could Virgin America use these cost pools and activity-based costing information internally?
Instructor Resources
These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. †Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. †The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)
- Student handout (pdf)†(contains entire blog posting + discussion questions)
- PowerPoint file†(brief article overview + discussion questions)
- YouTube video (narrated article in shareable YouTube link – COMING SOON)
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.
Accounting in the Headlines 
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