A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Revenue $ 2,000,000 Less: V

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A contribution income statement for the Nantucket Inn is shown
below. (Ignore income taxes.)
Revenue
$
2,000,000
Less: Variable expenses
1,300,000
Contribution margin
$
700,000
Less: Fixed expenses
560,000
Net income
$
140,000
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 $2,000,000?
4. Use the operating leverage factor to
calculate the increase in net income resulting from a 25 percent
increase in sales revenue.