Problem 4: CVP Analysis The condensed income statement of the Allen Hotel (AH) is as follows: In addition to these costs, there are other variable expenses of $950,000 (management fees and rent expense which vary with rooms revenue) and other fixed costs of $2,800,000 (including depreciation of $800,000 ). The Allen Hotel's tax rate is 20%. Required: 4.1 Prepare a contribution format income statement for Allen Hotel, including contribution margin and net operating income for each department and for the hotel in total. 4.2 What is the sales mix by department? 4.3 Calculate contribution margin ratios for each department as well as the weighted average contribution margin for Allen Hotel. 4.4 What is the break-even point in total sales dollars for Allen Hotel? At the breakeven level of sales, what is the expected level of sales for each department? 4.5 Calculate operating leverage for the Allen Hotel at the projected level of total sales. (i.e. use the initial income statement you prepared). Interpret this number in words. 4.6 If the Allen Hotel desires to earn net income of $700,000, what is the expected level of total sales necessary to generate such net income? (Hint: Consider taxes as an additional cost you'll need to cover, in addition to fixed costs). 4.7 Use your response to 2.6 to calculate the margin of safety in dollars and as a percentage of projected revenues. Remember to use net operating income, not net income, for your margin of safety calculations. 4.8 Consider a change in sales mix to rooms =60%, food =30%, telecommunications =5%, and gift shop =5%. What is the revised weighted-average contribution margin and break-even total sales point? 4.9 Recalculate operating leverage using the new sales mix at the new breakeven level of sales. Compare the operating leverage between the old and new sales mix. Interpret any differences in terms of their implications for firm cost structure