Reference no: EM132639072

Question - A small hotel has annual fixed costs of $88,000, variable costs of 68% of sales revenue, and a tax rate of 30%. The owner wants an after-tax net income of $33,600.

a) What sales revenue must be achieved to provide $33,600 net income after tax? Prepare contribution margin income statement to confirm the calculated required sales revenue.

b) What sales revenue are required to provide $33,600 operating income? Also assume that the hotel incurred additional debt of $50,000 at 8%/ year and that the terms of its lease increased by $10,000/ year. It was, however, able to reduce it variable costs by 5%/ unit.