3. The following income statement was drawn from the records of Margan Company, a merchandising firm. MARGAN COMPANY Income Statement for the Year Ended December 31, 2001 Sales Revenue (5,200 units X $ 180) $ 936,000 Cost of Goods Sold (5,200 units X $ 100) (520,000) Gross Margin 416,000 Sales Commissions (20% of sales) (187,200) Administrative Salaries (100,500) Advertising Expense (34,200) Depreciation Expense (52,500) Shipping and Handling Expenses (5,200 units X $ 4) (20.800) Net Income $ 20,800 Required: a) Reconstruct the statement using the contribution margin format. b) Calculate the level of operating leverage c) Use the level of operating leverage to determine the amount of net income that Margan will earn if sales increase by 10 percent. 4. Gulf Shores Electronics currently produces the shipping containers it uses in the delivery of the electronic products it sells. The monthly unit costs of producing 4,000 containers is given as follows: TOTAL UNIT Unit-level materials $ 16,000 4.00 Unit-level labor 12,000 3.00 Unit-level overhead 8,000 2.00 Product-level costs 10,000 2.50 Allocated facility-level costs 20,000 5.00 TOTAL COSTS 66,000 16.50 Eighty percent (60%) of Product-level costs can be avoided by purchasing the containers. Ten percent (10%) of Facility-level costs can be avoided by purchasing the containers. Pascal Container Company has offered to sell comparable containers to Gulf Shores for $ 12 each. Required: a) Should Gulf Shores continue to make the containers? Support your answer with appropriate documentation. b) Gulf Shores has the opportunity to lease the space currently being used in the manufacturing process. If the lease would produce $2,000 per month, would this affect your answer to requirement a? Support your answer with appropriate commentary