Question
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue $ 2,250,000 Less: Variable expenses 1,200,000 Contribution margin $ 1,050,000
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)
| |||
Revenue | $ | 2,250,000 |
|
Less: Variable expenses |
| 1,200,000 |
|
Contribution margin | $ | 1,050,000 |
|
Less: Fixed expenses |
| 675,000 |
|
Net income | $ | 375,000 |
|
Required: 1. Prepare a contribution income statement if the hotels volume of activity increases by 25 percent, and fixed expenses increase by 50 percent. 2. Prepare a contribution income statement if the ratio of variable expenses to revenue doubles. There is no change in the hotels volume of activity. Fixed expenses decline by $250,000.
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