The condensed income statement of the Allen Hotel (AH) is as follows:

Revenue

Vairable Costs

Fixed Costs

Dept. Income

Rooms

$ 5,000,000

$ 1,000,000

$ 500,000

$ 3,500,000

Food

$ 2,000,000

$ 800,000

$ 500,000

$ 700,000

Gift Shop

$ 400,000

$ 150,000

$ 100,000

$ 150,000

Other

$ 200,000

$ 200,000

$ 100,000

$ (100,000)

Total department income

$ 4,250,00

Other variable expenses

$ 950,000*

Other fixed costs

$ 2,800,000**

Pretax income

$ 500,000

Income taxes

$ 100,000

Net income

$ 400,000

*Management fees and rent expense vary with rooms revenue.

**Includes depreciation of $800,000

Required:

1. Compute the AH's weighted average CMR. Consider all variable costs.

2. Compute the AH's break even point.

3. If the AH desires to earn (net income) $500,000, what must its total food sales equal? (Assume the sales mix is constant.)

4. If the AH desires to generate pretax cash flow of $800,00, what must its total revenue equal? Assume its debt reduction payment is $300,000 for the year and its plans to purchase equipment for $100,000 is using cash.

5. If the sales mix charges to rooms = 60%, food = 30%, gift shop = 5%, and other = 5%, what is the revised CMRw?