Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 7, Problem 32E
Refer to the income statement given in the preceding exercise. Prepare a new contribution income statement for the Nantucket Inn in each of the following independent situations. (Ignore income taxes.)
- 1. The hotel’s volume of activity increases by 20 percent, and fixed expenses increase by 40 percent.
- 2. The ratio of variable expenses to revenue doubles. There is no change in the hotel’s volume of activity. Fixed expenses decline by $25,000.
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Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement.
Suppose the hotel’s revenue declines by 15 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income.
[The following information applies to the questions displayed below.]
A contribution income statement for the Karongi Inn is shown below. (Ignore income taxes.)
Revenue
$ 536,000
Less: Variable expenses
321,600
Contribution margin
$ 214,400
Less: Fixed expenses
160,800
Net income
$ 53,600
Required:
Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement.
Suppose the hotel’s revenue declines by 15 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income.
What is the hotel’s operating leverage factor when revenue is $536,000?
Use the operating leverage factor to calculate the increase in net income resulting from a 20 percent increase in sales revenue
Check my work
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)
$2, 300, eee
1,220, eee
$1,880, e00
699, 000
Revenue
Less: Variable expenses
Contribution margin
Less: Fixed expenses
Net income
$ 390, e00
Required:
1. Prepare a contribution income statement if the hotel's volume of activity increases by 25 percent, and fixed expenses increase by 50
percent.
2. Prepare a contribution income statement if the ratio of variable expenses to revenue doubles. There is no change in the hotel's
volume of activity. Fixed expenses decline by $260,000.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Prepare a contribution income statement if the hotel's volume of activity increases by 25 percent, and fixed expenses increase
by 50 percent.
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Chapter 7 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 7 - Prob. 1RQCh. 7 - What is the meaning of the term unit contribution...Ch. 7 - What information is conveyed by a...Ch. 7 - What does the term safety margin mean?Ch. 7 - Prob. 5RQCh. 7 - Delmarva Oyster Company has been able to decrease...Ch. 7 - In a strategy meeting, a manufacturing companys...Ch. 7 - What will happen to a companys break-even point if...Ch. 7 - Prob. 9RQCh. 7 - How can a profit-volume graph be used to predict a...
Ch. 7 - List the most important assumptions of...Ch. 7 - Why do many operating managers prefer a...Ch. 7 - Prob. 13RQCh. 7 - East Company manufactures VCRs using a completely...Ch. 7 - When sales volume increases, which company will...Ch. 7 - What does the term sales mix mean? How is a...Ch. 7 - A car rental agency rents subcompact, compact, and...Ch. 7 - How can a hotels management use cost-volume-profit...Ch. 7 - How could cost-volume-profit analysis be used in...Ch. 7 - Prob. 20RQCh. 7 - Prob. 21RQCh. 7 - Explain briefly how activity-based costing (ABC)...Ch. 7 - Fill in the missing data for each of the following...Ch. 7 - Prob. 24ECh. 7 - Rosario Company, which is located in Buenos Aires,...Ch. 7 - The Houston Armadillos, a minor-league baseball...Ch. 7 - Prob. 27ECh. 7 - Europa Publications, Inc. specializes in reference...Ch. 7 - Tims Bicycle Shop sells 21-speed bicycles. For...Ch. 7 - A contribution income statement for the Nantucket...Ch. 7 - Refer to the income statement given in the...Ch. 7 - Hydro Systems Engineering Associates, Inc....Ch. 7 - Disk City, Inc. is a retailer for digital video...Ch. 7 - CollegePak Company produced and sold 60,000...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Consolidated Industries is studying the addition...Ch. 7 - Serendipity Sound, Inc. manufactures and sells...Ch. 7 - Prob. 41PCh. 7 - The European Division of Worldwide Reference...Ch. 7 - Prob. 43PCh. 7 - Celestial Products, Inc. has decided to introduce...Ch. 7 - Prob. 45PCh. 7 - Jupiter Game Company manufactures pocket...Ch. 7 - Prob. 47PCh. 7 - Condensed monthly income data for Thurber Book...Ch. 7 - Cincinnati Tool Company (CTC) manufactures a line...Ch. 7 - Ohio Limestone Company produces thin limestone...Ch. 7 - Prob. 51PCh. 7 - Colorado Telecom, Inc. manufactures...Ch. 7 - Prob. 53CCh. 7 - Prob. 54CCh. 7 - Niagra Falls Sporting Goods Company, a wholesale...
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