A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) $ 500,000 300,000 $ 200,000 150,000 $ 50,000 Revenue Less: Variable expenses Contribution margin Less: Fixed expenses Net income
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) $ 500,000 300,000 $ 200,000 150,000 $ 50,000 Revenue Less: Variable expenses Contribution margin Less: Fixed expenses Net income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- What is the hotel’s operating leverage factor when revenue is $500,000?
- Use the operating leverage factor to calculate the increase in net income resulting from a 20 percent increase in sales revenue.
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Required information
Use the following information for the Exercises below.
[The following information applies to the questions displayed below.]
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)
$ 500,000
300,000
$ 200,000
Revenue
Less: Variable expenses
Contribution margin
Less: Fixed expenses
Net income
$ 50,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb87f551d-3fc5-4766-9e3a-b14ac4833b45%2F155f8ec0-74c7-4b1b-93ad-9b57c531eab8%2Fjz8s2jh_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
Use the following information for the Exercises below.
[The following information applies to the questions displayed below.]
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)
$ 500,000
300,000
$ 200,000
Revenue
Less: Variable expenses
Contribution margin
Less: Fixed expenses
Net income
$ 50,000
Expert Solution
Step 1: Introduction :
- CVP analysis is used to identify the changes in costs and volume that affect a company's operating income.
- CVP analysis plays vital role in decision making.
- It is used to find out number of units required to sell to gain a profit or break even point.
Operating Leverage Factor The is a Measure of Operating Leverage At a Particular Sales Volume. Operating Leverage Factor Computed by Dividing the Total Contribution Margin By Net Income.
Operating Leverage = (Contribution Margin / Net Income)
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