A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue Less: Variable expenses Contribution margin Less: Fixed expenses Net income $2,400,000 1,536,000 $ 864,000 648,000 $ 216,000 Required: 1. Show the hotel's cost structure by indicating the percentage of the hotel's revenue represented by each item on the income statement. 2. Suppose the hotel's revenue declines by 30 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income. 3. What is the hotel's operating leverage factor when revenue is $2,400,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 35 percent increase in sales revenue.

A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue Less: Variable expenses Contribution margin Less: Fixed expenses Net income $2,400,000 1,536,000 $ 864,000 648,000 $ 216,000 Required: 1. Show the hotel's cost structure by indicating the percentage of the hotel's revenue represented by each item on the income statement. 2. Suppose the hotel's revenue declines by 30 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income. 3. What is the hotel's operating leverage factor when revenue is $2,400,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 35 percent increase in sales revenue.

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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How would I calculate this problem? I just guessed on which answer made sense to me. Please help. thank you in advance.
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