The Karen Company owns the Central Road Motel, a 50-room rooms-only operation. In 2019, the

motel's average selling price was $80.00, its contribution margin ratio was 60 percent, and its annual

fixed costs totaled $458,800. *Contribution Margin ratio = (Selling Price - variable cost)/Selling Price

4. The owner would like to know what amount of revenue must be generated in 2020 to achieve a

pretax profit of $50,000. The 2020 selling price and expenses are the same as during 2019.

(Show your calculation)

5. If the motel increases its selling price by $5.00, how much more the motel can earn pretax profit?

Its expenses (variable and fixed) and the number of room sold remain the same as in question 4.

6. If the motel's contribution margin ratio increases to 65 percent and other factors (fixed cost and the

number of rooms sold) remain constant as in question 4, how much more the motel can earn pretax

profit? (Show your calculation)

Answer rating: 100% (QA)

4 Revenue Required to Achieve a Pretax Profit of 50000 Given Average Selling Price ASP 8000 Contribu... View the full answer