Faber Company, a merchandising firm, reported the following operating results:

Required
a. Reconstruct the income statement using the contribution margin format.
b. Calculate the magnitude of operating leverage.
c. Use the measure of operating leverage to determine the amount of net income that Faber will earn if sales revenue increases by 10percent.

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Income Statements Sales revenue (2,000 units X $100) Cost of goods sold (2,000 units X $65) Gross margin Sales commissions (10% of sales revenue) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expense (2,000 units X $1) Net income $ 200,000 (130,000) 70,000 (20,000) (15,000) (20,000) (11,000) (2,000) S 2,000