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Europa Publications, Inc., specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the
Europa Publications, Inc., specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the company's operations during the prior year are given in the following table. All units produced during the year were sold. (Ignore income taxes.) Sales revenue Fixed $1,350,000 Manufacturing costs: 382,000 Variable 625,000 Selling costs: Fixed 27,000 Variable 57,000 Administrative costs: Fixed 67,000 Variable 22,000 Required: 1-a. Prepare a traditional income statement for the company. 1-b. Prepare a contribution income statement for the company. 2. What is the firm's operating leverage for the sales volume generated during the prior year? 3. Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income? 4. Which income statement would an operating manager use to answer requirement 3?
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