Teachers Day Essay Example for Free

Teachers Day Essay Teachers Day BY Adi001 Teachers Day In some countries, Teachers Days are intended to be special days for the appreciation of teachers. World Teachers Day is celebrated across the world on October 5th[1], with great verve and enthusiasm. Ever since the importance of teachers has been recognized by UNESCO, by adopting the Recommendation concerning the status of teachers, World Teachers Day has been celebrated annually. This includes celebrations to honor the teachers for their special contribution in a particular field area or the community in general. Contents[hide] * History * 2 By country * 3 See also * 4 References * 5 External links I [edit] History The concept of celebrating teachers day originated in India to remember the great educationist Dr Sarvepalli Radhakrishnan. He was one of Indias most influential scholars of comparative religion and philosophy, whose dream was that Teachers should be the best minds in the country. 2] [edit] By country Country I Date of Teachers Day I Notes I Afghanistan I May 24 | Schools have a holiday, but students and teachers gather to celebrate at schools with special traditional food, cookies, music and resents to the teachers I Albania I March 7 | In 1887, the first school which taught lessons in Albanian was opened on this day in the small city of Kor#. I Algeria I February 28 | Argentina I September 11 I To honor the work of Domingo Faustino Sarmiento after he died. I Australia I Last Friday in October I On Australias celebration of World Teachers Day, the NEiTA Foundation and the Australian Scholarships Group (ASG) is proud to announce the national teaching recipients of the ASG Community Merit Awards. World Teachers Day was started by UNESCO and is celebrated in more than 100 countries around the world each year. On its 40th anniversary this year, it represents a significant token of the awareness, understanding, and appreciation displayed for the vital contribution that teachers make to education. I Azerbaijan I October 5 | Between 1965 and 1994, the first Sunday of October. Since 1994, on October 5, it has coincided with the World Teachers Day (est. 1994 by UNESCO). I Bahrain I February 28 | Brunei Darussalam I September 23 | To commemorate the birth date of the 28th ruler of Brunei, Sultan Omar Ali Saifuddien Ill, also known as the Architect of Modern Brunei who amongst others had emphasized on the importance of education to his ubjects by introducing policy of free education whereby the citizens are charged very nominal fees for attending schools. This policy have now been followed by the current 29th ruler who have since extended the policy further. I Bhutan I May 2 | Established and marked on the birth anniversary of the third King of Bhutan, Jigme Dorli Wangchuck, who introduced modern education in the country. I Bolivia I June 6 | Brazil I October 15 | A decree regulating the elementary schools in Brazil. The celebration gained popularity throughout the country, and October 1 5 was officially 0 was chosen to celebrate Teachers Day, because on that day in 1945, the Chilean poet Gabriela Mistral received the Nobel Prize. However, in 1977, the date was changed to October 16, to honor the founding of the Colegio de Profesores de Chile (Teachers College of I China (Hong Kong) I September 10 | Before 1997, Teachers Day was on September 28, following the tradition from the Republic of China since the 1950s. After the handover

Learning with Technology: Advantages and Disadvantages

Learning with Technology: Advantages and Disadvantages The present era is an era of technology. Everywhere we are surrounded with technological devices and everyone is somehow familiar with technology. The foundation of all types of technology is laid down in educational institutions. The education in secondary level plays an essential role since it is responsible for the development of society. Therefore, secondary education can be made more effective by the use of technology and all resources made available through technology. This introduces us to the term Educational Technology. The word was recognised in 1967 with the establishment of National Council for Educational Technology in the United Kingdom.  [1]  N. Venkataiah in his book Educational Technology noted that For different reasons educational technology perhaps will perform support or enriching role relative to classroom teaching in college and University rather than serving a replacement for such instruction.  [2]  Every technology has its merits and limitations and no one technology is useful for all types of learning. Benefits of using technology in the learning context We can talk of many benefits and criticism related to the use of technology in education. First we are going to deal with few advantages of making use of technology in the learning context. Technology in the learning process can increase students motivation. Computer based education can give immediate feedback to student and the right answers. Moreover a computer can give student motivation to continue learning, since a computer is patient and non-judgemental. According to James Kulik, who studies the effectiveness of computers used for leaning, students usually gain more in less time when receiving computer-based instructions and they build up more positive approach to the subject learned.  [3]  The American educator, Cassandra B. Whyte thought that successful academic performance in the future will depend on how computer usage and information technology would become important in the education experience of the future.  [4]   Educational technology provides the way for students to be active participants in their learning and to present differentiated questioning approaches. It expands individualized education and encourages the progress of personalized learning plans. Students are encouraged to use multimedia components and to integrate the knowledge they achieved in innovative ways.  [5]   Criticism to Learning Technology Although technology in the classroom does have many benefits, there are clear shortcomings as well. Not having proper training, limited access to enough quantities of a technology, and the additional time required for many running of technology are just a few reasons that technology is often not used widely in the classroom. Similar to learning a new task, special training is vital to ensure effectiveness when using things like technology. Training is a must when dealing with technology and education. Since technology is not the end goal of technology, but a means to be more effective in learning, educators must having a good grasp of the technology they can use or they are using and its advantages over the traditional means. If there is a lack of training, the use of technology will not give the all the good results that are given when technology is being used correctly. Another difficulty that which might arose when using technology for teaching/learning is the access to an enough amount of resources. Many teachers use technology by using a projector or screen, to show picture or videos, since there are not enough computers available for the students in order to be used by them and create or use it during the lesson. This also occurs when there is limited amount of access to technology because of high cost of technology and the fear of damages. There other cases when there the inconvenience of resources in such cases, such as having to transport the whole class to a computer lab or media room.  [6]   One of the disadvantages of using technology in education is that it is time consuming. Teachers had to prepare not only their lesson plans but had to prepare these resources using technology, which for teachers not familiar with technology can be a bit of headache. Another major issue which arise is that technology is too fast evolving. New resources have to be designed whenever the technological platform is changed. Changing for many times is not possible because of expenses and therefore there is the need to train teachers in order to know how to use new technologies.  [7]   But even there are all these disadvantages, one had to continue support the use of technology while investing in training of teachers, creating resources and made them available. Technologies of information and their implementation in learning In this part we are going to deal with some of the technologies of information available that can be used in education. While observing their strengths and weaknesses, we are going to evaluate their implementation in the teaching/learning context. Interactive Whiteboard An interactive whiteboard is a large display connected to a projector and a laptop/computer. By using a pen, stylus or finger users can control what is seen on the display through these tools. So, by touching the screen one manages and controls the computer. Through a pen/stylus the user can calibrate the system if necessary, activate programs, buttons and menus found on the computer which is connected to the interactive whiteboard. If the user wants to enter text, can either make use of on-screen keyboard or else can utilize handwriting by using the pen/stylus. As technology and software programs are continuing to develop, there is an increase in interactivity, since interactive whiteboards are being supplied with software programs that provide all necessary tools and functions which can give the ability to create virtual versions of paper flipcharts with pen and highlighter options. Such softwares also include tools like protractors, rulers and compasses to make use of traditional teaching tools, since students are more familiar with and more available to use.  [8]   Interactive whiteboards are being used in many schools as a replacement for the traditional whiteboards or flipcharts or video/media systems. Interactive whiteboards can be used to connect to online shared annotations and drawing environments. The software helps teacher to keep electronic records of their note for later use. Also, teacher can record their instruction which they had done during the lesson on the interactive whiteboard, which can be saved as a digital video format and then can post this material for review and revision by the students. This is an advantage for the students to see a revision of what had been done in school, especially when something was not understood well, when they are absent or when they want to revise for examination. Some software programs used with interactive whiteboards allow also the recording of the teachers voice.  [9]   Obviously the main advantage of this technology is interactivity as the name reflects. Students also by the help of the teacher can make use of the interactive whiteboard during the lesson, to choose picture, drawing, write and more. Research by Glover and Miller on the impact of interactive whiteboards in secondary schools, shows that even interactive whiteboards are a technology more than a computer, their use in schools and by teachers reflects that their potential is unrealized. According to the authors of this research the use of interactive whiteboards by teachers is made in three ways: as an aid to efficiency, as an extension device, and as a transformative device.  [10]   Even if technology always is done for the benefit of humanity and to make life more easer, interactive whiteboards also were criticised by many for diverse reasons. According to the Washington Post article, published in June 11, 2010: Many academics question industry-backed studies linking improved test scores to their products. And some go further. They argue that the most ubiquitous device-of-the-future, the interactive whiteboard essentially a giant interactive computer screen that is usurping blackboards in classrooms across America locks teachers into a 19th-century lecture style of instruction counter to the more collaborative small-group models that many reformers favour.  [11]   The Londons Institute of Education in a report on the interactive whiteboards says that, Although the newness of the technology was initially welcomed by pupils any boost in motivation seems short-lived. Statistical analysis showed no impact on pupil performance in the first year in which departments were fully equipped.  [12]  The report also emphasize such issues such as the fact that teacher gives more importance to the new technology than on what pupils should be learning. It was noted that the focus on interactivity as a technical process can lead to everyday activities which were being overestimated and also that in lower-ability classes it would slow the pace of whole class learning since individual pupils took turns at the board.  [13]   Internet In many countries and homes, the Internet and the World Wide Web in particular can be considered as part of the household and as common household term. This is proven by amount of reference to internet in the daily life and the amount of time which people, especially those who are still studying in schools, spend surfing on the internet.  [14]  The popularity of internet had made it as an important tool in education both as a great resource and as tool in class. The Internet is a global system of interconnected computer networks that are accessible to billions of users around the globe. It is a network of networks that is made up of so many networks which are private, public, academic, business and government use. The internet holds a vast range of information resources and services.  [15]   When for the first time teachers were introduced to the internet, there first reaction was about the tremendous educational potentials which exist on the internet. Internet was seen as an instrument to answer the learning needs of many students since it have vast amount of resources.  [16]   The use of internet adds something new, some real value, to teaching. The internet offers a tremendous way of communication between students themselves and with experts regarding the subject they are studying. Moreover students can join groups which discuss their favourite subject to continue enhance their information regarding that particular subject.  [17]   The internet can be a support when teacher using animation, pictures, maps, images and other resources. For example when studying the land in which Jesus lives, to which the student has never been, a virtual tour to some of the landmarks through the internet can make the lesson more attractive and interesting, since they are not only imagining what the teacher is saying about the Holy Land but also seeing how the Holy Land looks like. The use of internet is in contrast with the use of textbooks. Many of our textbooks can be considered outdated. The use of internet can gives us the opportunity to include current data in our lessons. On the other side the internet has also its weaknesses. Teaching involves human process that cannot be automated or manufactured. One important instrument of teaching is the human touch, which cannot be replaced. The extreme use of internet and computer lead to lacking of human touch when computer replace teachers.  [18]   Moreover there is no solid confirmation that computers develop positively students performance, since stories of success are isolated cases. This may result due to time needed for teachers to develop good applications to be used in classrooms. Even if the Internet improves learning, no one is yet to prove that the advantages of teaching using the Internet significantly outweigh the advantages of using other cheaper information media. Every new technology brings with it positive and negative impact. Nobody has taken time to analyze the negative impact of exposing children to the Internet may have on their social development.  [19]   Microsoft PowerPoint or other presentation software The use of PowerPoint during teaching has a significant amount of potentialities for encouraging more visual use and more proficient presentations, since one can put text, audio, videos, pictures, graphs and much more. PowerPoint is a widely used presentation programme which had originated in the business world but today had found also a very comfortable place in the world of teaching. The popularity of PowerPoint in educational technology stem directly from one of its famous features, that is, the ease of use, also by those who cannot be considered as experts on computer.  [20]   Good use of PowerPoint enhances the teaching and learning experience of both teachers and the students. This is continuously developing since the Microsoft Corporation which created PowerPoint is endlessly developing and adding more features to its software to make it more easy and professional look like, such as the integration of video clips and words at the same time and the use of the presenters view, in order for whom is doing the presentation to see what comes next or work with other programs at the same time. As well, the templates provided can help to make simple professional look of the presentation in order to be more effective and successful.  [21]   PowerPoint software also gives the accessibility to print what had been shown in the presentation in order for students to have a copy of the presentation shown during the lesson. Few are those disadvantages when using PowerPoint. An important element when using PowerPoint is the way how teachers should use it when they are making use of it in classrooms. Teacher should give attention to not have large amount of material on one slide which can make difficult for the students to comprehend what the teacher is actually doing in the lesson.  [22]   Video clip The use of video clips in education is developing very faster, since time has pass on static images and pictures. Today we are developing the idea of movement in pictures and in our presentations. The fact that video editing programs are now available for everyone to use on his personal computer, the trend that is developing is to create videos to enhance more the attention and motivation of the students. This developing is made easier through websites such as Youtube.com and Vimeo.com, where one can upload his videos while others can see and download for personal use. This innovative idea had created a planet of video resources which can be use for teaching. Conclusion The use of these available technologies and others can make our teaching more effective and interesting. This use of old textbooks and methods of learning are a bit out of this world, since students are all surrounded by this new technologies which are developing very fast. This does not mean that we have to trash all old methods and textbooks but it is important to incorporate technology to make lessons more enjoyable, creative and effective.

Uruguay :: History

Uruguay Uruguay republic, in east central South America, is the second smallest country on the continent. This country is bounded on the north by Brazil, on the east by Brazil and the Atlantic Ocean, on the south by the Atlantic Ocean and the Rà ­o de la Plata, and on the west by Argentina. The Uruguay River forms Uruguay's western boundary in full. Uruguay's land mass in whole is a small 176,215 sq km. Uruguay's capital city is Montevideo which is the main port, and economic center of the country. The currency of Uruguay is the peso uruguayos (7.97 peso uruguayos equal U.S.$1). This country's main sport entertainment is soccer. In 1516 Uruguay was discovered by the Spanish explorer Juan Dà ­az de Solà ­s. He was killed that same year by the Charrua, a local native tribe. Future attempts to colonize the territory during the 16th century were discouraged by this native tribe also. In 1624 the first permanent settlement was made by the Spanish on the Rà ­o Negro at Soriano. Between 1680 and 1683, Portuguese colonists in Brazil established several settlements along the Rà ­o de la Plata opposite Buenos Aires. However, the Spanish didn't make any attempts to remove the Portuguese until the year of 1723, when the latter began fortifying the heights around the Bay of Montevideo. A Spanish expedition forced the Portuguese to abandon this site, and there the Spanish founded the city of Montevideo in 1726. In present times, Uruguay has 660 km of coastline along the Atlantic Ocean and its bay, the Rà ­o de la Plata. The country also has an additional 813 km of frontage along its boundary rivers, including the Uruguay River. Uruguay's terrain varies for the different areas of the small country. In the southern areas of Uruguay the land consists of grassy plains, and the marshlands along the country's Atlantic coast. In the northern areas of Uruguay, not to mention the northwest area, there is a low plateau called the Cuchilla de Haedo. Uruguay's climate is a very temperate one. The average temperature for the warmest months 71 ° F, and for the coldest month, June, 50 ° F. Rainfall is also very well distributed along the year, and averages about 35 in a year. During the winter months cold storms blow from the southwest, yet frost is almost unknown in most parts of this country. This country has some resources that contribute to their money intake.

Fall of Constantinople :: World History

Fall of Constantinople By 350 A.D., Constantinople was one of the world's greatest capitals. The city was located between Asia and Europe, making it a very diverse and strategic place. The many bodies of water surrounding the peninsula gave Constantinople many trade routes as well as protection. The famous walls were also built to further strengthen security. Constantinople eventually rose to a beautiful city of strength and wealth. Its Greek heritage separated itself from the West with their religion of Eastern Orthodoxy. Despite the power of Constantinople, unending attacks and problems would eventually weaken the city. The first major catastrophe took place in 542, when a plague struck and killed massive amounts of people. The recovery was very slow, and it allowed for countless attacks. For Constantinople, however, it was just the beginning. Justinian ruled the Byzantine Empire during its height. His military faced strength from the East that greatly endangered his people. The Sassanian Empire of Persia was one threat that Byzantines needed to conquer. The Persians endangered eastern lands, so Justinian's military prevented any conquest. The Sassanians were defeated and security was briefly gained. After his success, Justinian wanted to regain lands the Roman Empire once lost to invaders. Byzantine armies began a reconquest of Spain, Italy, and North Africa. Battles against various Germanic groups took place, and western lands were conquered by the Byzantines. The wars were expensive, and resources were low. Defense became weak and territories were lost increasingly after Justinian's death. During the early 700s, the Byzantine Empire was in turmoil and chaos. As Leo III took power, Constantinople was being attacked by Avars, Bulgarians, and Arabs. The Arabs from the Middle East were a main concern for Leo III because of their large conquests in the Asia Minor. The Arabs advanced to spread their faith of Islam and control resources. The Arabs slowly acquired land until their siege on Constantinople itself. Leo III made brilliant defense moves to stop the invaders. His military forces attacked the Arabs from the rear successfully while naval forces were repelled with Greek Fire. Greek Fire was the empire's secret weapon that may have saved them from the Arab siege. Arab ships would burst into flames from contact with the "liquid fire." Fighting continued for a year until the Arabs retreated. Constantinople was defended successfully, but the empire suffered heavy losses and continued to loose land. The era from about 1025 to 1453 witnessed the Byzantine Empire in its ultimate destruction.

Children of Heaven Review

Children of Heaven This movie made me very thankful for everything I have in my life, including my shoes. I found it sad that All could not Just speak up for himself. If All would have asked the man working the grocery store about the shoes, then he might not go to all the trouble in the first place. I found it sad that the children had to work, and never got to play. The quality of life for this family bothered me deeply, and it made me blessed for the childhood that I had. The kids in this movie worked almost as servants to the adults, maintained pristine manors, and showed great perseverance.I noticed most of the adults in the movie were very strict, stern, and seemed like they were not afraid to beat a child. All made some of the highest grades in his class despite his hardships, he was a responsible kid. I Just don't understand why he did not speak up about the shoes to his teacher, principle, or coach. It was sad to see kids having to stick together, and share a pair of shoes t o prevent one of them from getting a beating. All's sister should have asked the other girl wearing her shoes, where she got them.The girl may have Just given them to her in exchange for the en, or when she received her new shoes. This movie was one hardship after another, heartbreaking for me to watch. It makes me want to donate shoes for children who may not have any at all. It was sad to see people In the movie live In lavish mansion, and then compare It to All's home. All's dad was paid very good for his gardening work, this money would be a precious asset to his family. When the man at the mosque gave All's dad the tools, this showed how the Islamic community supported the others In need. Overall It seemed Like a rough situation to me.

Religious and Ethnic Diversity Paper Essay

The religious group that I have chosen is Hinduism and the ethnic/racial group that is not my own that I have chosen is Black (African Descent). I have chosen these two to explain how they are similar and how they are different. Hinduism is a religion that most people know nothing about. They are one of the world’s oldest religions as it has no beginning and precedes recorded history. Hinduism is a religion that leads the individual to personally experience the truth within themselves and reach full consciousness where man and God are one. After reading I have found that Hinduism differs from other religious groups because they believe in reincarnation whereas the other religious groups believe that once a person dies they either will go to heaven or hell depending on how they were when they were alive. The experience of Hinduism and others that do not share their beliefs or practices is criticism. They are often judged and criticized because they fail to distinguish between revelations. This religious group has contributed to American culture because they don’t believe in violence. They also contributed to the International Society for Krishna Consciousness. Some examples of prejudice and discrimination against Hinduism would be the Caste system or saying that they all burn their wives as well as discriminate against India where most come from. After reading the information to write this paper I must say it has helped me to understand this religion because I didn’t know that they were so much criticized. From what I read it seems like a very peaceful religion. They believe in reincarnation which I believe is possible, I mean, â€Å"why does a person have to go to heaven or hell†? I think that their religion is against violence which we definitely could have less of. The racial group that I have chosen was Black of African descent. This group differs from others because they have gone through so much over the years. They have experienced slavery which many other religions haven’t as they more so experienced discrimination. Blacks have not had such a great experience with other races because of always being mistreated because of their color. I think that they were brought over for slavery and still experience this even now these days from certain types of other races. Blacks have contributed to American culture though business and through entertainment. Most of the entertainment business is African American as well as sports and now we even have a black president. All very good contributions to American culture. Some examples of discrimination would be things like unequal pay for blacks performing the same work as whites, isolating blacks to only work in certain areas or specific locations, routinely denying black’s promotions, laying off blacks while whites keep their jobs and take on theirs as well. All of these are prime examples of discrimination that blacks go through in the United States. The sources of this discrimination would be whites or other races that were not black. Most of the cases that I read about though were whites still discriminating against black even after all the movements to move past racism. What I learned about this racial group is that even after all these years they are still faced with discrimination more than other racial groups. I can’t really say that I have learned any more than I already knew just because I see this happen regularly. I have a black/Cuban fiance and I have seen jobs do these things to him and now we have 2 boys that are mixed with white and black and have seen them faced with discrimination just because of the color of their skin. In conclusion, I believe that Hinduism and Black (African descent) both experience similar discrimination if the fact that they are perceived by first impressions and by the color of their skin. They are not given the luxury of being spoken with or getting to know them without the preconceived notion of their skin color. Both Hinduism and Blacks contribute to American culture business wise and yet many fail to know that. I can’t really say they are different because these two groups both experience prejudice and discrimination quite often. They are both groups of people that have done nothing wrong and just want to be a part of the world. References – Nine Beliefs of Hinduism. (2013). Retrieved from http://www. himalayanacademy. com/readlearn/basics/nine-beliefs – Hinduism and the Encounter with Other Faiths. (2008). Retrieved from http://www. worlddialogue. org/content. php? id=59 – The Black Factor. (n. d. ). Retrieved from http://theblackfactor. blogspot. com/2008/03/examples-of-discrimination-harassment. html.

A Case Study on Cost Estimation and Profitability Analysis

ISSUES IN ACCOUNTING EDUCATION Vol. 26, No. 1 2011 pp. 181–200 American Accounting Association DOI: 10. 2308/iace. 2011. 26. 1. 181 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines Francisco J. Roman ABSTRACT: This case exposes students to the application of regression analyses to be used as a tool pursuant to understanding cost behavior and forecasting future costs using publicly available data from Continental Airlines. Speci? cally, the case focuses on the harsh ? nancial situation faced by Continental as a result of the recent ? ancial crisis and the challenges it faces to remain pro? table. It then highlights the importance of reducing and controlling costs as a viable strategy to restore pro? tability and how regression analysis can assist in this pursuit. Students are next presented with quarterly data for various categories of costs and several potential cost drivers, which they must use to perform regressions on operating costs using a variety of cost drivers. They must then use their regression results to forecast operating costs and conduct a pro? tability analysis to project quarterly pro? ts for the upcoming ? scal year.Finally, students must summarize the main results of their analysis in a memorandum addressed to Continental’s management, providing recommendations to restore pro? ts. In particular, the concept of mixed cost functions is reinforced, as is the understanding of the steps required to perform regression analysis in Excel, interpreting the regression output, and the underlying standard assumptions in regression analysis. The case has been tested and well received in an intermediate cost accounting course and it is suitable for both undergraduate and graduate students. Keywords: cost estimation; pro? ability analysis; cost behavior; regression analyses; cost functions. Data Availability: All data are from public sources and are available in hard copy inside the case. Data are also availabl e in electronic form by the author upon request. INTRODUCTION n 2008, the senior management team at Continental Airlines, commanded by Lawrence Kellner, the Chairman and Chief Executive Of? cer, convened a special meeting to discuss the ? rm’s latest quarterly ? nancial results. A bleak situation lay before them. Continental had incurred an operating loss of $71 million dollars—its second consecutive quarterly earnings de-I Francisco J. Roman is an Assistant Professor at Texas Tech University. I thank Kent St. Pierre editor , Michael Costa, and two anonymous referees for their suggestions on previous versions of the case. Editor’s note: Accepted by Kent St. Pierre Published Online: February 2011 181 182 Roman cline that year. Likewise, passenger volume was signi? cantly down, dropping by nearly 5 percent from the prior year’s quarter. Continental’s senior management needed to act swiftly to reverse this trend and return to pro? tability. Being the fourth largest airline in the U.S. and eighth largest in the world, Continental was perceived as one of the most ef? ciently run companies in the airline industry. Nonetheless, 2008 brought unprecedented challenges for Continental and the entire industry as the United States and much of the world was heading into a severe economic recession. Companies cutting deeply into their budgets for business travel, the highest yielding component of Continental’s total revenue, together with a similar downward trend from the leisure and casual sector, combined to sharply reduce total revenue.Concurrent with this revenue decline, the price of jet fuel soared to record levels during 2008. 1 Thus, while revenue was decreasing, Continental was paying almost twice as much in fuel costs. Interestingly, fuel costs surpassed the ? rm’s salaries and wages as the highest cost in Continental’s cost structure. This obviously had a negative impact on the bottom line, squeezing even fur ther the already strained pro? t margins. The outlook for a quick recovery in the U. S. economy and, consequently, an upturn in the demand for air travel in the short term did not seem likely.Continental’s internal forecasts indicated that a further decline in passenger volume should be anticipated throughout 2009, with a recovery in travel possibly occurring by the middle of 2010. To summarize, adverse economic conditions in the U. S. , coupled with the rise in fuel costs, were dragging down Continental’s pro? ts and relief was unlikely through the foreseeable future. THE DECISION TO REDUCE FLYING CAPACITY AND THE IMPACT ON OPERATING COSTS Given the situation described above, management needed to act swiftly to restore pro? tability. Several strategic options were evaluated.Since the U. S. and much of the world was facing a severe recession, the prospect for growing revenues by either raising airfares or passenger volume seemed futile. Contrary to raising revenue, Con tinental’s managers believed that raising fares could potentially erode future revenues beyond the present level. Discounting fares did not seem a plausible solution either, because given the severity of the economic situation a fare cut could fall short in stimulating additional passenger demand and lead to lowering revenues. Thus, because management anticipated that revenues would remain ? t for most of the year, the only viable short-term solution to restoring pro? ts was a substantial and swift reduction in operating costs. This could most effectively be accomplished in two ways. First, through a reduction in ? ying capacity adjusted to match projected passenger demand. With this in mind, Continental’s management agreed to reduce ? ying capacity by 11 percent on domestic and international routes. 2 As a result of this action, Continental would eliminate the least pro? table or unpro? table ? ights and, accordingly, would ground several planes in the ? eet.Managemen t anticipated that this decision would reduce several of the ? rm’s operating costs. Apart from this, Continental could achieve further reductions in costs by implementing several cost-cutting initiatives and through operational ef? ciencies. For example, management pro- 1 2 To illustrate, jet fuel is tied to the price of oil and, over the past year, oil prices surged from about $70 to $135 per barrel. Consequently, the price of jet fuel increased markedly, from an average of $1. 77 per gallon to $4. 20 by the mid-summer of 2008. Speci? cally, on June 13, 2008, Continental Airlines announced that it planned to reduce its ? ght capacity by 11 percent. By shrinking capacity, Continental expected to reduce the number of domestic and international ? ights from its three major hubs in Houston, Cleveland, and Newark Maynard 2008 . Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Conti nental Airlines 183 jected that it could achieve reductions in Passenger Services expenses by consolidating several tasks during passenger check-in and by reducing food and beverage waste served during ? ights. Additionally, the ? m could reduce various miscellaneous expenses through targeted cuts in discretionary spending. In sum, to close the gap in pro? tability, Continental’s strategy was geared toward slashing operating costs by cutting capacity and through aggressive identi? cation and implementation of cost-cutting initiatives. The next step would be for management to know precisely how their decision to downsize capacity would impact the ? rm’s future operating costs, and also identify speci? c areas in which the ? rm could achieve additional cost reductions. Additionally, the cost analysis would help forecast the ? m’s operating costs and projected pro? ts or losses for the upcoming ? scal year. However, before we can proceed with such analysis, an exam ination of how the various categories of Continental’s costs behave is in order. Before we begin, let us prepare with an overview of the airline industry and its competitive landscape, and an understanding of why cost behavior bears particular relevance in this case. Relative to other industries, airlines are a very dif? cult business to manage. In particular, they are exposed to tremendous risks brought by volatility inherent in their business model, as they deal with high ? ed costs, labor unions, instability in fuel prices, weather and natural disasters, passenger safety, and security regulations. These aspects bring a large burden to airlines’ cost structures. Moreover, competition within the industry is ? erce; the proliferation of discount carriers, such as Southwest Airlines and, most recently, Jet Blue, and the end of fare regulation in 1978, has hindered airlines’ pricing power and their ability to spur revenues. For these reasons, cost containment is a critically important aspect of pro? tability in this industry.In order for Continental to restore pro? tability in this harsh environment of weak demand for air travel, it must be able to contain its operating costs, especially its massive ? xed costs, which are visible in several ways. For example, salaries for pilots, ? ight attendants, and mechanics, as well as aircraft leasing costs, are typically ? xed, varying little with shifts in passenger volume. Because ? xed costs typically embody the amount of operating capacity of a ? rm, they are commonly referred as â€Å"capacity† costs. Since ? xed costs do not self-adjust to ? ctuations in passenger volume, the only way in which they can be decreased or increased is if management adjusts them in accordance to the level of operating capacity. In contrast, other costs, such as passenger services and reservation and distribution costs, behave as variable and would self-adjust with variations in volume or operating activity. He nce, to assess the impact of this strategic decision to alter Continental’s cost structure, and identify the areas that could achieve the greatest reduction in costs, we must resolve how Continental’s operating costs behave and what drives them.In what follows, we learn how to apply regression analyses to examine cost behavior and forecast future costs, and then use that knowledge to assess how the reduction in ? ying capacity would affect Continental’s operating costs and pro? tability in the near term. ESTIMATING COSTS USING REGRESSION ANALYSES The previous discussion highlighted the importance of examining the behavior of Continental’s operating costs to pave the way for a cost and pro? tability analysis using regression analysis. Regression analysis is a powerful statistical tool that is frequently used by ? ms to examine cost behavior and predict future costs. The idea behind regression analysis is straightforward: historical data for costs, and the various activities that could potentially drive operating costs, are inserted into a mathematical calculation which yields the average amount of change in that particular cost that has occurred over time. Average values provided by regression calculations may then be applied to estimate future change that will occur in that cost given a one-unit change in one or Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 184 Roman ore of the business activities which drive that cost. 3 More precisely, in a regression model, cost is a function of one or more business activities or factors underlying a business operation. Simply put, the business activities are the drivers of operating costs. Therefore, since activities drive costs, our ? rst step in the estimation of a cost function is to identify the underlying activities or other potential factors that drive the cost in question—the cost drivers. This requires extensive knowledge of the business ope ration. In the case of Continental Airlines, the potential drivers of operating costs vary greatly.For instance, as previously noted, the number of passengers that Continental ? ies may drive the costs related to Passenger Services. Likewise, Aircraft Maintenance and Repairs costs could be driven by the number of aircraft in the ? eet and by the level of ? ying capacity set by Continental i. e. , available seat miles . In synthesis, to predict how Continental’s operating costs would be affected by the decision to reduce capacity, and to identify those areas in which additional room is available for cost cutting, we need to identify which costs in this ? rm’s cost structure behave as variable, ? ed, or mixed in which elements of both variable and ? xed are observable . Equally important, we should also identify the speci? c drivers if any of each cost. Your job is to assist management in their quest to restore pro? tability at Continental Airlines. Speci? cally, you mus t conduct regression analyses to examine cost behavior and then use this information to forecast operating costs and pro? tability for the upcoming year. As part of your cost analysis, you should investigate how the decision to cut ? ying capacity would impact the ? rm’s future operating costs and, equally important, identify those speci? expense categories or operating areas in which this ? rm could attain additional costs saving by implementing cost-cutting initiatives. Your conclusions should be outlined in a memorandum directed to Continental’s Executive management team. You are provided next with a description of Continental’s operating costs and the potential drivers of costs so you can conduct regression analysis to estimate the corresponding cost functions. To help you in estimating the regressions, a comprehensive set of instructions for performing regression analysis using Microsoft Excel is provided in the Appendix.Immediately following the descriptio n of costs, a series of questions is provided that should help guide your analysis. Additionally, to help you estimate your regressions, Exhibit 1 presents past quarterly data for all of the above expenditures for the period of January 2000 through December 2008, while Exhibit 2 provides quarterly operations data for the same period of time. CONTINENTAL’S OPERATING COSTS AND POTENTIAL COST DRIVERS As shown in Exhibit 1, there are ten categories of operating costs.These include salaries and wages, aircraft fuel and related taxes, aircraft rentals, airport fees, aircraft maintenance and repairs, depreciation and amortization, distribution costs, passenger services, regional capacity purchases, and other expenses. Of these, some represent a single expense item. For example, the cost of aircraft rentals and airport fees together comprise a single cost item. Other costs represent cost pools comprising several cost items. Such is the case of passenger services and other expenses. T he following provides a detailed description of each cost, along with the potential cost drivers. 3 4 For ease in exposition, cost functions and regression analyses are discussed brie? y here. For further insight on cost functions and on the mechanics of regression analyses, I refer the reader to the Appendix. A cost driver represents a particular business activity, which usually tends to have a cause-and-effect relationship with a given cost. For example, for airlines, a typical cost driver for landing fees is the number of daily ? ights carried by the airline, as well as the number of passengers ? own. An increase decrease in the number of ? ights or passengers ? own would increase decrease landing fees.Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines 185 EXHIBIT 1 REVENUES AND OPERATING COSTS DATA Obs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Obs. 1 2 3 4 5 6 Period 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 3Q-2001 4Q-2001 1Q-2002 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3Q-2004 4Q-2004 1Q-2005 2Q-2005 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 Q-2008 Revenues Fuel Salaries and Wages Capacity Purchases Aircraft Rentals Landing Fees 2,277,000,000 334,000,000 672,000,000 — 206,000,000 2,571,000,000 313,000,000 719,000,000 — 210,000,000 2,622,000,000 354,000,000 748,000,000 — 215,000,000 2,429,000,000 392,000,000 736,000,000 — 213,000,000 2,451,000,000 345,000,000 758,000,000 — 214,000,000 2,556,000,000 349,000,000 800,000,000 — 223,000,000 2,223,000,000 322,000,000 779,000,000 — 230,000,000 1,739,000,000 213,000,000 684,000,000 — 236,000,000 1,993,000,000 208,000,000 732,000,000 — 228,000,000 2,192,000,000 254,000,000 746,000, 000 — 231,000,000 2,178,000,000 76,000,000 743,000,000 — 227,000,000 2,039,000,000 285,000,000 738,000,000 — 216,000,000 2,042,000,000 347,000,000 778,000,000 — 223,000,000 2,216,000,000 302,000,000 762,000,000 — 224,000,000 2,365,000,000 316,000,000 778,000,000 — 225,000,000 2,247,000,000 290,000,000 738,000,000 158,000,000 224,000,000 2,307,000,000 333,000,000 688,000,000 317,000,000 220,000,000 2,553,000,000 387,000,000 711,000,000 328,000,000 222,000,000 2,602,000,000 414,000,000 703,000,000 347,000,000 224,000,000 2,437,000,000 453,000,000 717,000,000 359,000,000 225,000,000 2,505,000,000 470,000,000 715,000,000 353,000,000 227,000,000 2,857,000,000 75,000,000 649,000,000 382,000,000 229,000,000 3,001,000,000 684,000,000 646,000,000 406,000,000 234,000,000 2,845,000,000 714,000,000 639,000,000 431,000,000 238,000,000 2,947,000,000 672,000,000 661,000,000 415,000,000 245,000,000 3,507,000,000 744,000,000 791,000,000 454,000,000 248,000,0 00 3,518,000,000 858,000,000 743,000,000 475,000,000 249,000,000 3,156,000,000 760,000,000 680,000,000 447,000,000 248,000,000 3,179,000,000 684,000,000 726,000,000 430,000,000 248,000,000 3,710,000,000 842,000,000 821,000,000 444,000,000 248,000,000 3,820,000,000 895,000,000 836,000,000 446,000,000 249,000,000 3,523,000,000 33,000,000 744,000,000 473,000,000 249,000,000 3,570,000,000 1,048,000,000 729,000,000 506,000,000 247,000,000 4,044,000,000 1,363,000,000 704,000,000 589,000,000 246,000,000 4,072,000,000 1,501,000,000 765,000,000 553,000,000 244,000,000 3,471,000,000 993,000,000 760,000,000 425,000,000 240,000,000 129,000,000 138,000,000 133,000,000 132,000,000 141,000,000 153,000,000 139,000,000 148,000,000 161,000,000 160,000,000 163,000,000 149,000,000 152,000,000 152,000,000 165,000,000 151,000,000 160,000,000 163,000,000 171,000,000 160,000,000 171,000,000 181,000,000 182,000,000 174,000,000 185,000,000 198,000,000 195,000,000 86,000,000 193,000,000 190,000,000 209,000,00 0 198,000,000 207,000,000 210,000,000 225,000,000 210,000,000 Period Distribution Costs Aircraft Maintenance Depreciation Passenger Services Other Expenses 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 248,000,000 261,000,000 255,000,000 217,000,000 243,000,000 230,000,000 159,000,000 171,000,000 167,000,000 149,000,000 160,000,000 162,000,000 95,000,000 98,000,000 102,000,000 107,000,000 105,000,000 111,000,000 85,000,000 91,000,000 97,000,000 89,000,000 91,000,000 96,000,000 286,000,000 284,000,000 288,000,000 277,000,000 318,000,000 295,000,000 (continued on next page)Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 186 Obs. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Obs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Roman Period Distribution Costs Aircraft Maintenance Depreciation Passenger Services Other Expenses 3Q-2001 4Q-2001 1Q-2002 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3 Q-2004 4Q-2004 1Q-2005 2Q-2005 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 4Q-2008 194,000,000 142,000,000 172,000,000 158,000,000 138,000,000 124,000,000 27,000,000 138,000,000 131,000,000 135,000,000 137,000,000 140,000,000 139,000,000 136,000,000 138,000,000 154,000,000 154,000,000 142,000,000 160,000,000 178,000,000 157,000,000 155,000,000 161,000,000 176,000,000 171,000,000 174,000,000 182,000,000 194,000,000 182,000,000 159,000,000 142,000,000 104,000,000 114,000,000 119,000,000 119,000,000 124,000,000 133,000,000 126,000,000 135,000,000 115,000,000 112,000,000 102,000,000 107,000,000 93,000,000 112,000,000 106,000,000 116,000,000 121,000,000 127,000,000 140,000,000 140,000,000 140,000,000 144,000,000 169,000,000 166,000,000 142,000,000 159,000,000 167,000,000 52,000,000 135,000,000 120,000,000 131,000,000 106,000,000 112,000,000 112,000,000 114,000,000 116,000,000 110,000,000 110,000,000 108,000,000 104,000,000 105,0 00,000 104,000,000 102,000,000 99,000,000 98,000,000 97,000,000 95,000,000 96,000,000 97,000,000 99,000,000 99,000,000 99,000,000 101,000,000 106,000,000 107,000,000 106,000,000 108,000,000 112,000,000 111,000,000 89,000,000 71,000,000 77,000,000 73,000,000 78,000,000 68,000,000 70,000,000 73,000,000 81,000,000 73,000,000 69,000,000 76,000,000 84,000,000 77,000,000 77,000,000 84,000,000 91,000,000 80,000,000 82,000,000 90,000,000 97,000,000 87,000,000 90,000,000 9,000,000 105,000,000 95,000,000 96,000,000 107,000,000 113,000,000 91,000,000 121,000,000 166,000,000 382,000,000 454,000,000 276,000,000 277,000,000 320,000,000 91,000,000 250,000,000 455,000,000 304,000,000 279,000,000 287,000,000 278,000,000 316,000,000 280,000,000 282,000,000 305,000,000 293,000,000 323,000,000 313,000,000 333,000,000 340,000,000 357,000,000 357,000,000 328,000,000 356,000,000 427,000,000 461,000,000 372,000,000 Period Total Aircraft 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 3Q-2001 4Q-2001 1Q-200 2 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 514 522 535 522 548 557 501 522 538 570 570 554 562 70 OPERATIONS AND COST DRIVER DATA Leased Aircraft Flights Passengers Available Seat Miles 403 410 414 398 406 416 377 393 400 404 401 410 419 428 98,820 97,871 97,967 98,378 98,590 99,018 98,564 81,109 81,883 82,815 81,737 78,809 75,178 75,617 11,201,000 12,084,000 12,155,000 11,456,000 11,220,000 12,256,000 11,254,000 9,508,000 12,062,000 13,099,000 13,006,000 12,874,000 11,518,000 13,044,000 20,951,000,000 21,384,000,000 22,356,000,000 21,409,000,000 21,459,000,000 22,813,000,000 21,994,000,000 18,219,000,000 20,375,000,000 22,286,000,000 22,626,000,000 21,054,000,000 20,843,000,000 21,241,000,000 Available SeatMiles Regional — — — — — — — — — — — — 1,767,000,000 2,073,000,000 (continued on next page) Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cos t Estimation and Pro? tability Analysis at Continental Airlines Obs. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Obs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Period Total Aircraft 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3Q-2004 4Q-2004 1Q-2005 2Q-2005 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 4Q-2008 187 OPERATIONS AND COST DRIVER DATALeased Aircraft Flights Passengers Available Seat Miles 570 579 586 587 592 594 598 604 611 622 630 634 648 648 630 625 631 628 641 630 653 632 428 434 437 440 445 448 453 459 466 477 483 484 482 480 446 418 415 415 414 390 412 397 76,297 75,650 74,859 75,816 74,211 74,443 71,494 74,651 74,630 75,886 74,962 77,729 77,468 79,030 78,601 82,582 81,118 80,850 76,719 76,096 78,599 76,000 Available Seat Miles Regional 13,727,000 13,769,000 12,810,000 14,558,000 14,862,000 14,252,000 14,122,000 15,540,000 15,905,000 15,448,000 15,594,000 17,596,000 17,328,000 16,601,0 00 16,176,000 18,120,000 17,901,000 16,733,000 16,440,000 7,108,000 17,962,000 15,183,000 22,819,000,000 21,907,000,000 22,670,000,000 24,150,000,000 24,674,000,000 23,588,000,000 23,585,000,000 25,482,000,000 26,833,000,000 25,720,000,000 26,117,000,000 28,259,000,000 29,262,000,000 27,280,000,000 27,250,000,000 29,592,000,000 30,346,000,000 28,550,000,000 28,376,000,000 30,304,000,000 30,383,000,000 26,448,000,000 1,605,000,000 2,980,000,000 2,400,000,000 2,603,000,000 1,999,000,000 3,408,000,000 2,740,000,000 3,026,000,000 3,112,000,000 3,095,000,000 3,082,000,000 3,374,000,000 3,503,000,000 3,292,000,000 3,126,000,000 3,177,000,000 3,193,000,000 3,104,000,000 3,098,000,000 ,450,000,000 3,390,000,000 3,046,000,000 Period Passenger Miles Flown Employees Fuel Price Fuel Consumed 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 3Q-2001 4Q-2001 1Q-2002 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3Q-2004 4Q-2004 1Q-2005 2Q-2005 15,005,000,000 16,491,000,000 17,325,000,000 15,340,000,000 15,114,000,000 17,053,000,000 16,206,000,000 12,767,000,000 14,867,000,000 16,489,000,000 16,960,000,000 17,252,000,000 14,352,000,000 16,129,000,000 18,041,000,000 16,412,000,000 16,255,000,000 18,735,000,000 19,922,000,000 18,239,000,000 18,112,000,000 20,292,000,000 45,000 45,500 46,000 5,944 38,396 39,000 39,500 39,461 40,229 41,011 41,809 40,244 38,960 39,000 39,500 39,000 38,240 37,496 36,766 38,255 41,831 45,742 $0. 829 $0. 797 $0. 865 $0. 885 $0. 856 $0. 815 $0. 824 $0. 826 $0. 644 $0. 723 $0. 760 $0. 740 $1. 029 $0. 881 $0. 857 $0. 872 $1. 041 $1. 787 $1. 199 $1. 190 $1. 453 $1. 670 377,000,000 386,000,000 398,000,000 372,000,000 369,000,000 391,000,000 373,000,000 369,000,000 308,000,000 332,000,000 340,000,000 316,000,000 305,000,000 308,000,000 330,000,000 314,000,000 320,000,000 347,000,000 345,000,000 321,000,000 324,000,000 344,000,000 (continued on next page) Issues in Accounting EducationVolume 26, No. 1, 2011 American Accounting Associ ation 188 Roman Period 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Passenger Miles Flown Employees Fuel Price Fuel Consumed 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 4Q-2008 Obs. 21,762,000,000 20,033,000,000 20,336,000,000 23,367,000,000 24,042,000,000 21,772,000,000 21,450,000,000 24,623,000,000 25,422,000,000 22,670,000,000 22,280,000,000 24,836,000,000 24,746,000,000 20,825,000,000 50,018 42,200 42,600 43,450 41,500 38,033 41,800 43,300 41,400 39,640 43,000 40,100 43,500 42,490 $1. 880 $1. 776 $1. 904 $2. 10 $2. 215 $2. 064 $1. 895 $2. 079 $2. 206 $2. 499 $2. 797 $3. 856 $3. 450 $2. 925 364,000,000 344,000,000 347,000,000 375,000,000 387,000,000 362,000,000 361,000,000 395,000,000 406,000,000 380,000,000 375,000,000 389,000,000 395,000,000 339,000,000 EXHIBIT 2 PROJECTIONS OF REVENUES AND OPERATING ACTIVITY FOR YEAR 2009 Variable Revenues Available seat miles Available regional seat miles Number of passengers Number of planes Number leased planes Price of fuel per gallon Gallons of fuel consumed Quarter 1 Quarter 2 Quarter 3 Quarter 4 $2,962,000,000 26,323,000,000 2,971,000,000 14,408,000 634 398 $1. 82 403,000,000 2,767,000,000 28,007,000,000 3,044,000,000 16,348,000 617 394 $2. 07 430,000,000 $2,947,000,000 28,933,000,000 3,130,000,000 16,795,000 604 380 $1. 99 369,000,000 $2,462,000,000 26,291,000,000 3,002,000,000 15,258,000 601 379 $1. 98 479,000,000 All ? nancial and operational data represent quarterly data for the quarter beginning January 2000 Observation 1 through December 2008. Data have been compiled from Continental’s 8-K and10-K reports, submitted to the Securities and Exchange Commission. De? nitions of Operations Variables: Available seat miles the number of seats available multiplied by the number of miles ? wn; Available regional seat miles available seat miles on regional routes; Number of passengers number of paying passengers ? own; Number of planes number of planes in the ? eet, including regional routes aircraft; Number of leased planes number of leased planes; Price of jet fuel average price per gallon of jet fuel in the respective quarter; and Gallons of fuel consumed number of gallons of fuel consumed in the respective quarter. Salaries and Wages This account represents costs related to salaries and wages, as well as fringe bene? ts, of Continental’s workers. These include salaries for pilots and wages for ? ght attendants and ground crew, as well as wages for Continental’s mechanics. Additionally, a signi? cant portion of this salary pool represents wages of reservation specialists, customer service representatives at airports, and the salaries for administrative and support personnel e. g. , ? ight schedulers, technology Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines 189 personnel, accountants, and division managers . A possible cost driver of salaries is the available seat miles. Aircraft Fuel and Related Taxes This represents the cost of jet fuel and related fuel taxes. Jet fuel cost tends to be driven by the current price of jet fuel and gallons of jet fuel consumed. Aircraft Rentals These are expenses for capital leases of aircraft. The main driver is the number of leased planes in Continental’s ? eet, including regional jets operated on behalf of Continental by four regional airlines under various capacity purchase agreements. Airport Fees Represents landing fees and passenger security fees paid to the various domestic and international airports where Continental ? ies.Landing fees are driven by the number of passengers. Aircraft Maintenance and Repairs These are expenses associated with the service and maintenance of planes. These include expenses related to scheduled maintenance, spare parts and materials, and airframe and engine overhauls. The main drivers of these cost s are the number of planes in the ? eet and the number of miles ? own. Depreciation and Amortization This represents depreciation and amortization expenses of aircraft, ground equipment, buildings, and other property. It must be emphasized that the largest portion of depreciation expense relates to the depreciation of aircraft.Although depreciation expenses are driven by the acquisition cost of Continental’s capital assets, depreciation is greatly in? uenced by both company policy and accounting principles, such as the depreciation method, that a ? rm adopts. Distribution Costs These expenses represent credit card discount fees, booking fees, and travel agency commissions, all of which are affected by passenger revenue. Therefore, the driver of these costs is total revenue. Passenger Services This is also a cost pool that includes expenses related to processing and servicing passengers prior to take-off, during ? ight, and after arrival at their destination.A signi? cant port ion of these costs is generated by Continental’s Field Services Division, the main function of which is to provide service to planes prior to take-off. Some of these expenses relate to checking in passengers, handling luggage on and off planes, cleaning planes, stocking planes with beverage and food, and refueling the aircraft prior to take-off. The potential cost driver of these costs is the number of passengers. Regional Capacity Purchases These are costs related to the purchase of regional routes served by several regional airlines on behalf of Continental ExpressJet, Chautauqua, CommutAir, and Cogan .These costs are 5 Available seat miles is calculated as the number of seats available for passengers multiplied by the number of scheduled miles those seats are ? own. Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 190 Roman driven by the combined ? ying capacity of the four airlines: available regional seat miles. Other Expenses This is a cost pool that comprises many ancillary and discretionary expenditures, including technology expenses, security and outside services, general supplies, and advertising and promotional expenses.Further, this cost pool contains various special charges for gains and losses from the sale of retired aircraft and costs of future leases. Given the large variety of miscellaneous items, there is no clear driver of these expenses; however, a large portion of them, such as advertising and promotional expenses, are driven by total revenue. DISCUSSION QUESTIONS 1. 2. 3. 4. 5. 6 Using the quarterly data for operating costs and the various cost drivers of costs provided by Exhibits 1 and 2, estimate regression for cost category of costs.Then, write the appropriate cost function for each category of cost and then interpret your regression results. Based on your regression results, where do you see the largest reductions in costs if ? ying capacity is lowered by 11 percent? Also, in which areas d o you see opportunities to achieve further cost reductions and why? Exhibit 2 provides a quarterly forecast of revenues, jet fuel prices,6 and the projected operating activity for 2009. Using the information from your regressions and the forecast information provided in Exhibit 2, estimate Continental’s operating costs and expected pro? for the upcoming ? scal year. Based on the results of your pro? tability analysis, what can you say about the ? rm’s ? nancial outlook? Would Continental be earning an operating pro? t in 2009? If not, what should Continental’s management do to restore pro? tability in 2009? Summarize your conclusions in a memorandum addressed to Continental’s CEO. In the memo, you must clearly communicate your main ? ndings, emphasizing speci? c areas in which you see the greatest potential to achieve further reductions in costs and, based on your pro? tability analysis, sum up the ? nancial outlook for 2009.You should note that Continent al has entered into several future contracts to hedge the exposed risks of rising fuel prices. The projected costs for jet fuel on exhibit re? ects the value of the various future contracts which guarantee Continental a ? xed price for jet fuel at various maturity dates in 2009, as well the estimated gallons of fuel that Continental plans to use during the year. Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines 191 CASE LEARNING OBJECTIVES AND IMPLEMENTATION GUIDANCECost estimation is a fundamental aspect of managerial/cost accounting Datar et al. 2008; Eldenburg and Wolcott 2005 . For example, cost estimation is critical for developing budgets, setting up cost standards, inventory valuation, product costing, and many other applications. Ultimately, ? rms’ ability to accurately predict production and operating costs has a profound impact on decision-making. A dditionally, given the frequency with which ? rms downsize or expand their operations in response to economic or market-wide conditions, knowing how this strategic decision of scaling output impacts ? ms’ future operating costs, and which tools can facilitate this task, has become increasingly relevant for ? rms. Nonetheless, despite its importance, cost estimation is a topic that merits further discussion in accounting textbooks. Although several managerial/cost accounting textbooks provide rich theoretical discussions of cost estimation, including cost behavior, cost functions, and, to some extent, regression analyses, the examples that are typically used to illustrate such an important concept often lack a sense of realism. Either ? titious data are commonly used in cost estimation, or the examples covered fail to capture realistic situations faced by ? rms in a â€Å"real world† context. Accordingly, this case aims to close this gap. The objective is to support stu dents in learning how to apply regression analyses to understand cost behavior and forecast future costs using real data from ? rms. The case focuses on the harsh ? nancial situation faced by Continental Airlines as a result of the recent ? nancial crisis and the challenges it faces to remain pro? table.It then highlights the importance of reducing and controlling costs as a viable strategy to restore pro? tability, and how regression analysis can assist in this pursuit. Students are next presented with quarterly data for various categories of costs and several potential cost drivers, which they must analyze and then perform regressions on operating costs using a variety of cost drivers. Based on these results, students have to examine how costs behave and then use the regression output to forecast the ? rm’s operating costs for year 2009. As part of the cost analysis, students must also identify speci? areas in which Continental could achieve the largest cost savings as a re sult of cutting capacity and implementing other cost-cutting measures. Apart from this, they must conduct a pro? tability analysis to project quarterly pro? ts for the upcoming ? scal year. The learning objectives of the case are as follows: 1. 2. 3. Students learn to conduct regression analysis in Excel and use this technique to study cost behavior and forecast future costs. Students also learn how to use actual ? rm-level data from public sources for estimating costs, and apply cost estimation in a â€Å"real world† context that involves a widespread decision among ? ms: downsizing capacity. Moreover, learning to use public ? nancial information in cost estimation could have implications that reach beyond accounting; learning to access public ? nancial information exposes students to the possibilities of applying regression analysis for business analysis in general, including cost and pro? tability analyses. The case requires students to synthesize their ? ndings in a memor andum addressed to Continental’s CEO; thus, students are also exposed to re? ning their writing skills in a business setting. Implementation GuidanceThis case is primarily designed for use in an intermediate managerial/cost accounting undergraduate class; however, it could also work well in a graduate-level managerial accounting course, at either the master’s level or M. B. A. Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 192 Roman The realistic nature of the setting everyone can easily identify with the business model of airlines makes a particularly appealing environment for students to learn how regression analyses can be applied in cost estimation in a real-world context.The questions presented in the case include both practical and theoretical questions. As an augmentation of the principles contained in the application of this case, instructors could enhance the student experience by devoting time to reviewing the concepts o f cost functions and cost estimation, as well as discussing the fundamentals of regression analyses, so students can be exposed to these concepts prior to receiving the case. Alternatively, students can review these concepts on their own.The Appendix provides a detailed explanation of cost functions and regression analysis and describes the steps to perform regression analysis in Excel. Additionally, it provides students with broad guidelines to write an effective memorandum. Student Feedback The case was administered to two sections of an upper-level intermediate undergraduate cost accounting class at a major U. S. university. Seventy-seven students responded to an evaluation survey to assess whether they improved their understanding of the concepts illustrated in the case, as well as to whether the case illustrated a â€Å"real world† application in predicting operating costs.As shown in Table 1, students agreed that the case enhanced their understanding of the use of regre ssion analyses in predicting future costs mean of 4. 17, based on a ? ve-point scale , the case encouraged them to think critically about the behavior of operating costs in a â€Å"real world† context mean of 4. 03, based on a ? ve-point scale ; plus, they found the case interesting and recommended it for use in teaching cost estimation via regression analyses mean of 4. 07, based on a ? ve-point scale; see also Table 2 . Similar positive responses are shown in Table 2. For example, Table 2 reports students’ knowledge on the use of regression