A motel has a rooms department and a dining room, and fixed cost is $470,000. Annual sales revenue and cost figures are as follows:

RoomsFoodTotal

Sales Revenue$750,000$250,000$1,000,000

Variable Costs(187,500)( 150,000)( 337,500)

Contribution Margin$562,500$ 100,000$662,500

a. If we want to double the current operating income before tax with variable costs remaining the same and covering fixed costs, what increase in room revenue is needed? (4 points)

b. If we want to double the current total operating income before tax with direct costs remaining the same and covering fixed costs, what increase in food sales revenue is needed? (4 points)

c. If we want to double the current operating income before tax with direct costs remaining the same, what will increase in sales revenue have to be if the increase is provided jointly by both departments combined? Assume sales revenue ratios stay as originally stated. (5 points)

d. What would total sales revenue have to be to achieve all of the following: (7 points)

• Additional operating income of $50,000
• Additional fixed cost of $20,000
• The sales revenue ratio changes from 75% for rooms and 25% for food to 70% for rooms and 30% for food.
• Rooms variable cost increase to 30% and food variable cost decrease to 50%