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A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)   Revenue $ 2,250,000   Less: Variable expenses   1,200,000   Contribution margin $ 1,050,000   Less: Fixed expenses   675,000   Net income $ 375,000     Required: 1. Prepare a contribution income statement if the hotel’s volume of activity increases by 25 percent, and fixed expenses increase by 50 percent. 2. Prepare a contribution income statement if the ratio of variable expenses to revenue doubles. There is no change in the hotel’s volume of activity. Fixed expenses decline by $250,000.

A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)   Revenue $ 2,250,000   Less: Variable expenses   1,200,000   Contribution margin $ 1,050,000   Less: Fixed expenses   675,000   Net income $ 375,000     Required: 1. Prepare a contribution income statement if the hotel’s volume of activity increases by 25 percent, and fixed expenses increase by 50 percent. 2. Prepare a contribution income statement if the ratio of variable expenses to revenue doubles. There is no change in the hotel’s volume of activity. Fixed expenses decline by $250,000.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)

 

Revenue

$

2,250,000

 

Less: Variable expenses

 

1,200,000

 

Contribution margin

$

1,050,000

 

Less: Fixed expenses

 

675,000

 

Net income

$

375,000

 
 

Required:
1. Prepare a contribution income statement if the hotel’s volume of activity increases by 25 percent, and fixed expenses increase by 50 percent.
2. Prepare a contribution income statement if the ratio of variable expenses to revenue doubles. There is no change in the hotel’s volume of activity. Fixed expenses decline by $250,000.

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