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	$	1,500,000
Manufacturing costs:
Fixed		400,000
Variable		715,000
Selling costs:
Fixed		30,000
Variable		60,000
Administrative costs:
Fixed		70,000
Variable		25,000

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 firms 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)?

Req. 1-a.

EUROPA PUBLICATIONS, INC.
Income Statement
For the Year Ended December 31, 20XX
		$0
Operating expenses:
		0
		$0

Req. 1-b.

EUROPA PUBLICATIONS, INC.
Income Statement
For the Year Ended December 31, 20XX
Variable expenses:
		0
		$0
Fixed expenses:
		0
		$0

Req. 2

What is the firms operating leverage for the sales volume generated during the prior year? (Round your answer to 2 decimal places.)

Operating leverage

Req. 3

Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Percentage increase in net income

%

Req. 4

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

	Contribution income statement Traditional income statement