Question
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue $ 500,000 Less: Variable expenses 300,000 Contribution margin $ 200,000
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue $ 500,000 Less: Variable expenses 300,000 Contribution margin $ 200,000 Less: Fixed expenses 150,000 Net income $ 50,000 Required: 1) Prepare a contribution income statement if the hotels volume of activity increases by 20 percent, and fixed expenses increase by 40 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 $25,000.
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