[The following information applies to the questions displayed below.] A contribution income statement for the Karongi Inn is shown below. (Ignore income taxes.) Revenue $ 536,000 Less: Variable expenses 321,600 Contribution margin $ 214,400 Less: Fixed expenses 160,800 Net income $ 53,600 Required: Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement. Suppose the hotel’s revenue declines by 15 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income. What is the hotel’s operating leverage factor when revenue is $536,000? Use the operating leverage factor to calculate the increase in net income resulting from a 20 percent increase in sales revenue
[The following information applies to the questions displayed below.] A contribution income statement for the Karongi Inn is shown below. (Ignore income taxes.) Revenue $ 536,000 Less: Variable expenses 321,600 Contribution margin $ 214,400 Less: Fixed expenses 160,800 Net income $ 53,600 Required: Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement. Suppose the hotel’s revenue declines by 15 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income. What is the hotel’s operating leverage factor when revenue is $536,000? Use the operating leverage factor to calculate the increase in net income resulting from a 20 percent increase in sales revenue
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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[The following information applies to the questions displayed below.]
A contribution income statement for the Karongi Inn is shown below. (Ignore income taxes.)
| Revenue | $ 536,000 |
|---|---|
| Less: Variable expenses | 321,600 |
| Contribution margin | $ 214,400 |
| Less: Fixed expenses | 160,800 |
| Net income | $ 53,600 |
Required:
- Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement.
- Suppose the hotel’s revenue declines by 15 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income.
- What is the hotel’s operating leverage factor when revenue is $536,000?
- 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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