Europa Publications, Inc. specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the companys operations during the prior year are given in the following table. All units produced during the year were sold. (Ignore income taxes.)

Sales revenue	$	1,750,000
Manufacturing costs:
Fixed		572,000
Variable		818,000
Selling costs:
Fixed		35,000
Variable		65,000
Administrative costs:
Fixed		75,000
Variable		30,000

Required:

1. 1-a. Prepare a traditional income statement for the company.

2. 1-b. Prepare a contribution income statement for the company.

3. 2. What is the firms operating leverage for the sales volume generated during the prior year?

4. 3. Suppose sales revenue increases by 14 percent. What will be the percentage increase in net income?

5. 4. Which income statement would an operating manager use to answer requirement (3)?