Question

1. The condensed income statement of the Holiday Inn (HI) in the Excel file, please use the information to answer the following questions:

1. Compute the CMR for each department (Room, Food, & Other). (3 points)
2. Compute the HI's weighted CMR. Please use the simple way to calculate the CMRw, which is using the total revenue and total variable costs (1 points)
3. Compute the HI's breakeven point. (1 point)
4. If the HI want to make $500,000 of net income, what must the rooms department sales equal? (5 points)

   The condensed income statement of the Holiday Inn (HI) is as follows:
   	Revenue	VC	FC	NI
   Room	$        1,000,000	$      200,000	$      100,000	$      700,000
   Food	$           500,000	$      200,000	$      100,000	$      200,000
   Other	$           300,000	$      100,000	$        50,000	$      150,000
   Total department income				$   1,050,000
   Other Variable expenses*				$      100,000
   Other Fixed Costs**				$      600,000
   Pretax income				$      350,000
   Income taxes				$        70,000
   Net income				$      280,000
   * Rent (10%of room sales)
   ** Includes depreciation and amortization of $150,000

Answer 1

Computation of CMR for each department
		Room	Food	others	Total
Sales		1,000,000	500,000	300,000	1,800,000
Less: Variable cost
VC		-      200,000	-       200,000	-    100,000
Other variable cost		-      100,000
Total VC		-      300,000	-       200,000	-    100,000
Contribution margine (sales - VC)		700,000	300,000	200,000	1,200,000
Less: Fixed cost		-      100,000	-       100,000	-      50,000
Other Fixed cost (7:3:2)		-      350,000	-       150,000	-    100,000
(other Fixed cost opprotioned based on contribution)
Total FC		-      450,000	-       250,000	-    150,000	-     850,000
Profit (contribution - FC)		250,000	50,000	50,000
CMR %		Contribution margine/sales*100
		70	60	66.666667
CMR W %	total sales - total VC/total slaes*100				33
	(1800000-1200000)/1800000*100)
BEP %	Fixed cost/sales-variable cost				71
	(850000/1800000-600000)