Question.

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A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue Less: Variable expenses Contribution margin Less: Fixed expenses Net income $1,000,000 550,000 $ 450,000 300,000 $ 150,000 Required: 1. Show the hotel's cost structure by indicating the percentage of the hotel's revenue represented by each item on the income statement. 2. Suppose the hotel's revenue declines by 30 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income. 3. What is the hotel's operating leverage factor when revenue is $1,000,000? 4. Use the operating leverage factor to calculate the increase in net income resulting from a 35 percent increase in sales revenue. Show the hotel's cost structure by indicating the percentage of the hotel's revenue represented by each item on the income statement. NANTUCKET INN Contribution Income Statement Amount Percent Revenue % Variable expenses Contribution margin Fixed expenses $ 1,000,000 550,000 450,000 300,000 150,000 % Net income $ %