A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue Less:...

 

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 $500,000 300,000 $200,000 150,000 $ 50,000 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 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. 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. NANTUCKET INN Contribution Income Statement Amount Revenue $ 500,000 Percent % Variable expenses 300,000 Contribution margin $ 200,000 % Fixed expenses 150,000 Net income $ 50,000 % 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 $500,000 300,000 $200,000 150,000 $ 50,000 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 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. 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. NANTUCKET INN Contribution Income Statement Amount Revenue $ 500,000 Percent % Variable expenses 300,000 Contribution margin $ 200,000 % Fixed expenses 150,000 Net income $ 50,000 %