Exercise 7-32 Continuation of Preceding Exercise (LO 7-4, 7-7)

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

Revenue	$	1,700,000
Less: Variable expenses		980,000
Contribution margin	$	720,000
Less: Fixed expenses		510,000
Net income	$	210,000

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 $140,000.