Revenues Problem 20 Keith and Sue's Dude Ranch (KSDR) is a forty-room hotel near Denver with a thirty-seat restaurant and stables (a profit center). Keith and Sue Cass, the owners, are interested in having you use CVP analysis to aid them in determining various sales levels for their resort. The following is a summary of the most recent annual income statement Keith and Sue's Dude Ranch Condensed Income Statement For the year ended December 31, 20X5 Rooms Food Stables Total $500,000 $ 200,000 $5,000 $705,000 Variable Expenses 150,000 150,000 4,000 304,000 Contribution Margin $350,000 $ 50,000 $1,000 401,000 Fixed Costs 151,000 Income Tax 125,000 Net Income $125,000 Required: 1. What is the food department's CMR? 2. What is the weighted average CMR for KSDR? 3. What is the breakeven point? 4. The Casses wish to increase net income by $30,000 and feel this can be done by increas- ing room sales only. Determine the necessary increase in room sales to meet this requirement. 5. Assume independent of #4) that revenue from the stables can be increased, but only with a $500 increase in advertising (a fixed cost) for brochures to go in each room. What level of sales from the stables must be generated to cover this cost? 6. Assume that the brochures mentioned in 5 are used as a direct mailing. The cost would now be $1,500 to cover printing and mailing, but sales for each department would increase. Assuming that room sales, food sales, and stable revenue remain at a ratio of 5 to 2 to .05, how much must revenues increase for net income to remain constant