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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 20 percent. Use the contribution-margin percentage to calculate the resulting decrease net income. 3. What is the hotel's operating leverage factor when revenue is $1,500,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 25 percent increase in sales revenue.

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 20 percent. Use the contribution-margin percentage to calculate the resulting decrease net income. 3. What is the hotel's operating leverage factor when revenue is $1,500,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 25 percent increase in sales revenue.

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 Less: Variable expenses Contribution margin Less: Fixed expenses Net income 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 20 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 $1,500,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 25 percent increase in sales revenue. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Show the hotel's cost structure by indicating the percentage of the hotel's revenue represented by each item on the income statement. $1,500,000 975,000 $ 525,000 420,000 $ 105,000 NANTUCKET INN Contribution Income Statement Revenue Variable expenses Contribution margin Fixed expenses Net income $ $ $ Amount 1,500,000 975,000 525,000 420,000 105,000 Percent % % %
Transcribed Image Text: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 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 20 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 $1,500,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 25 percent increase in sales revenue. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Show the hotel's cost structure by indicating the percentage of the hotel's revenue represented by each item on the income statement. $1,500,000 975,000 $ 525,000 420,000 $ 105,000 NANTUCKET INN Contribution Income Statement Revenue Variable expenses Contribution margin Fixed expenses Net income $ $ $ Amount 1,500,000 975,000 525,000 420,000 105,000 Percent % % %
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