A contribution income statement for the La Jolla Inn is shown below. (Ignore income taxes.)
|
|
|
|
| Revenue |
$ |
2,400,000 |
|
| Less: Variable expenses |
|
1,260,000 |
|
|
|
|
|
| Contribution margin |
$ |
1,140,000 |
|
| Less: Fixed expenses |
|
720,000 |
|
|
|
|
|
| Net income |
$ |
420,000 |
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| 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 $280,000.
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