Kate, the owner/operator of the Las Vegas Inn, is interested in determining the level of sales necessary to realize a net income of $500,000 next year.

Kate, the owner/operator of the Las Vegas Inn, is interested in determining the level of sales necessary to realize a net income of $500,000 next year. She has complied records on each department’s sales and costs, and assumes that the sales mix will be the same next year. The major department, the rooms department, had sales of $2,500,000, and its contribution margin was $1,750,000. The coffee shop had sales of $750,000 and variable costs of $300,000. The restaurant had sales of $1,200,000 and variable costs of $750,000. Ms. Kate assumes that the fixed costs will be $1,000,000.

 

What is the CMRw?

2500000+750000+1000000=4450000 1750000+300000+750000=2800000 1000000

4450000-2800000/ 4450000= 0.37

What is the required level of total sales to generate $500,000 net income? (Assume that there are no income taxes).

1000000+500000= 1500000

What is the required level of total sales to generate $500,000 net income if the income tax rate is 30%?

Ib =

R =

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