1. Use the following income statement to answer question a. through f. Round up on to 1/100th. Use 2 decimal places to solve all problems. (6 pts)
Summary Income Statement
Smith Hotel
For the year ended December 31 200X (In Thousand)
Operating Departments: Revenue Cost of Sale Payroll Other expenses Income (Loss)
Rooms 5000 0 1000 400 3600
Food 1500 450 650 300 100
Beverage 800 200 250 80 270
Telephone 300 200 50 20 30
Total 7600 850 1950 800 4000
Undistributed Operating Expenses:
Administrative and General 100 50 150
Information systems 50 50 100
Human resources 30 260 290
Transportation 20 40 60
Marketing 100 300 400
Property operation and maintenance 100 100 200
Utility 0 400 400
Income after undistributed operating expenses 2350 2000 2400
Rent, Property taxes and insurance 200
Interest 1000
Depreciation 500 1700
Income before income taxes 700
Income taxes 210
Net Income 490
a. What is CMRw?
b. What is total revenue at breakeven?
c. What is total revenue to yield a net income of $500,000?
d. What is rooms revenue when a net income equals $500,000?
e. Revenue at breakeven if fixed costs increase by $300,000?
f. Revenue at breakeven if fixed costs increase by $300,000 and revenue increase 10% for each department through price increase?
2. ABC Hotel has the following operating information (4 pts):
a. The rooms department generates 60% of the sales revenue and operates with a CMR of 0.7.
b. The F&B department generates 40% of sales revenue and has a CMR of 0.5.
c. Fixed costs per year are $200,000.
d. The hotel’s tax rate is 40%.
Required: What sales revenue is required for achieving a net income of $150,000?
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