What costs would the New England Patriots have considered when analyzing the purchase of team planes and when pricing the rental of its team planes? Original blog posting (August 29, 2017)

New England Patriots

New England Patriots Purchased 2 Boeing 767 aircraft for team Cost approximately $10 million for both planes Will use for ten away games during 2017 – 2018 season (and playoffs/Super Bowl) Cost of chartering planes is approximately $4 million if team planes are not owned Patriots might rent out its planes when not in use

Question 1 List the costs that a team could incur when chartering aircraft to fly its team to the away games. Use your imagination. List the costs that a team could incur when owning and flying its own aircraft for transporting the team to away games. Again, use your imagination. Compare your two lists of costs. What costs appear on both lists? What costs would have been relevant to the New England Patriots’ aircraft purchase decision? What qualitative factors would have influenced the Patriots’ aircraft decision? What costs would be relevant to the pricing decision for renting the planes when not in use by the team? Do you think aircraft depreciation is a relevant cost to consider when pricing the rental of the Patriots’ aircraft? Why or why not? What capital budgeting tools could the Patriots have used to analyze this aircraft purchase decision?

Question 1 List the costs that a team could incur when chartering aircraft to fly its team to the away games. Use your imagination.

Question 2 List the costs that a team could incur when owning and flying its own aircraft for transporting the team to away games. Again, use your imagination.

Question 3 Compare your two lists of costs. What costs appear on both lists? What costs would have been relevant to the New England Patriots’ aircraft purchase decision?

Question 4 What qualitative factors would have influenced the Patriots’ aircraft decision?

Question 5 What costs would be relevant to the pricing decision for renting the planes when not in use by the team?

Question 6 Do you think aircraft depreciation is a relevant cost to consider when pricing the rental of the Patriots’ aircraft? Why or why not?

Question 7 What capital budgeting tools could the Patriots have used to analyze this aircraft purchase decision?

Question Recap List the costs that a team could incur when chartering aircraft to fly its team to the away games. Use your imagination. List the costs that a team could incur when owning and flying its own aircraft for transporting the team to away games. Again, use your imagination. Compare your two lists of costs. What costs appear on both lists? What costs would have been relevant to the New England Patriots’ aircraft purchase decision? What qualitative factors would have influenced the Patriots’ aircraft decision? What costs would be relevant to the pricing decision for renting the planes when not in use by the team? Do you think aircraft depreciation is a relevant cost to consider when pricing the rental of the Patriots’ aircraft? Why or why not? What capital budgeting tools could the Patriots have used to analyze this aircraft purchase decision?

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/ Questions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu