5 Exercise 2-14A (Static) Assessing the magnitude of operating leverage LO 2-4 12.5 points The following income statement applies to Kawai Company for the current year: Income Statement Sales revenue (200 units x $60) Variable cost (200 units x $36) Contribution margin Fixed cost Net income $12,000 (7,200) 4,800 (1,600) $ 3,200 eBook Hint References 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 Kawai Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not affected. C-1. Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income the two income statements. Complete this question by entering your answers in the tabs below. Reg A and B Req C1 Reg C2 Use the contribution margin approach to calculate the magnitude of operating leverage. Afterwards, use the operating leverage measure previously computed for Requirement A to determine the amount of net income that Kawai Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not affected. (Do not round intermediate calculations. Round "Operating leverage" to 1 decimal place.) Show less A a. Operating leverage b. Net income 5 Exercise 2-14A (Static) Assessing the magnitude of operating leverage LO 2-4 12.5 The following income statement applies to Kawai Company for the current year: points Income Statement Sales revenue (200 units X $60) Variable cost (200 units x $36) Contribution margin Fixed cost $12,000 (7,200) 4,800 (1,600) $ 3,200 eBook Net income Hint References 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 Kawai Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not affected. C-1. Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Complete this question by entering your answers in the tabs below. Req A and B Req c1 Reg C2 Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. Annual Income Statement Sales revenue Variable cost Contribution margin Fixed cost Net income UT Exercise 2-14A (Static) Assessing the magnitude of operating leverage LO 2-4 The following income statement applies to Kawai Company for the current year: 12.5 points Income Statement Sales revenue (200 units x $60) Variable cost (200 units * $36) Contribution margin Fixed cost $12,000 (7,200) 4,800 (1,600) $ 3,200 eBook Net income Hint References 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 Kawai Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not affected. C-1. Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Complete this question by entering your answers in the tabs below. Reg A and B Reg C1 Reg C2 Calculate the percentage change in net income for the two income statements. Change in net income %