Assessing the magnitude of operating leverage The following income statement applies to Wong Company for the current year:

Required

a. Use the contribution margin approach to calculate the magnitude of operating leverage.

b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Wong Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected.

c. Verify your answer to Requirement b by constructing an income statement based on a 20 percent increase in sales revenue. The sales price is not affected. Calculate the percentage change in net income for the two income statements.