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4 Check my work 6 The following income statement was drawn from the records of Adams, a merchandising firm: 1.25 points eBook ADAMS COMPANY Income

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4 Check my work 6 The following income statement was drawn from the records of Adams, a merchandising firm: 1.25 points eBook ADAMS COMPANY Income Statement For the Year Ended December 31 Sales revenue (8,000 units * $166) Cost of goods sold (8,000 units * $82) Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (8,000 units * $2) Net income $1,328,000 (656,000) 672,000 (66,400) (87,000) (32,000) (41,000) (16,000) $ 429,600 Hint Print References 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 Adams will earn if sales increase by 20 percent. Req A Req B and C Reconstruct the income statement using the contribution margin format. ADAMS COMPANY Income Statement For the Year Ended December 31 Less: Variable costs Less: Fixed costs Req A Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Adams will earn if sales increase by 20 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.) b. Operating leverage Net income C

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