Mark Sun Ranch is a 40-room hotel with a 30-seat restaurant. Bennett, the owner of the hotel, has asked you to use your knowledge of cost volume profit analysis (CVP) to help her

plan next years operation and prepare the years forecast income statement. He wishes to increase net income by $80,000 in 2020 and feels he can achieve this if the hotel performs with the same revenue mix and variable cost structure with fixed costs remain the same

as in 2019. The following is a summary of last years (2019) income statement:

Mark Sun Ranch

Condensed Income Statement

For the year Ended December 31st, 2019

Rooms ($)

Food ($)

Staples ($)

Total ($)

Revenue

800,000

300,000

15,000

1,115,000

Variable Cost

350,000

150,000

4,000

504,000

Contribution

450,000

150,000

11,000

611,000

Fixed Costs

251,000

Income before

interest and

360,000

tax

Income Tax

180, 000

Net income

180, 000

Required:

(a) Calculate the sales revenue the hotel must earn to achieve the targeted net income. [6]

(b) Redraft the Mark condensed income statement for 2020 (show the various operating

departments and seen in the original statement).

[6]

35. Mark Sun Ranch is a 40-room hotel with a 30-seat restaurant. Bennett, the owner of the hotel, has asked you to use your knowledge of cost volume profit analysis (CVP) to help her plan next year's operation and prepare the year's forecast income statement. He wishes to increase net income by $80,000 in 2020 and feels he can achieve this if the hotel performs with the same revenue mix and variable cost structure with fixed costs remain the same as in 2019. The following is a summary of last year's (2019) income statement: Mark Sun Ranch Condensed Income Statement Mark Sun Ranch Condensed Income Statement For the year Ended December 31, 2019 Rooms ($) Food (s) Staples (S) Total ($) Revenue 800,000 300.000 15,000 1,115,000 Variable Cost 350,000 150,000 4,000 504,000 Contribution 450,000 150,000 11,000 611,000 Fixed Costs 251,000 Income before interest and 360,000 tax Income Tax 180,000 Net income 180,000 Required: (a) Calculate the sales revenue the hotel must earn to achieve the targeted net income. [6] (1) Redraft the Mark condensed income statement for 2020 (show the various operating departments and seen in the original statement). [6] 35. Mark Sun Ranch is a 40-room hotel with a 30-seat restaurant. Bennett, the owner of the hotel, has asked you to use your knowledge of cost volume profit analysis (CVP) to help her plan next year's operation and prepare the year's forecast income statement. He wishes to increase net income by $80,000 in 2020 and feels he can achieve this if the hotel performs with the same revenue mix and variable cost structure with fixed costs remain the same as in 2019. The following is a summary of last year's (2019) income statement: Mark Sun Ranch Condensed Income Statement For the year Ended December 31, 2019 Rooms (S) Food (8) Staples (8) Total (S) Revenue 800,000 300.000 15,000 1,115,000 Variable Cost 350,000 150.000 4,000 504,000 Contribution 450.000 150.000 11,000 611,000 Fixed Costs 251,000 Income before interest and 360,000 tax Income Tax 180,000 Net income 180,000 Required: (a) Calculate the sales revenue the hotel must earn to achieve the targeted net income. [6] (b) Redraft the Mark condensed income statement for 2020 (show the various operating departments and seen in the original statement). [6]