Revenue $500,000 Less: Variable expenses 300,000 Contribution margin $200,000 Less: Fixed expenses 150,000 Net income $ 50,000
Revenue $500,000 Less: Variable expenses 300,000 Contribution margin $200,000 Less: Fixed expenses 150,000 Net income $ 50,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)
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 15 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 $500,000?
4. Use the operating leverage factor to calculate the increase in net income resulting from a 20 percent increase in sales revenue.
Transcribed Image Text:Revenue
$500,000
Less: Variable expenses
300,000
Contribution margin
$200,000
Less: Fixed expenses
150,000
Net income
$ 50,000
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