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Exercise 11-15A (Static) Using contribution margin format Income statement to measure the magnitude of operating leverage LO 11-3, 11-4 The following income statement was drawn
Exercise 11-15A (Static) Using contribution margin format Income statement to measure the magnitude of operating leverage LO 11-3, 11-4 The following income statement was drawn from the records of Joel Company, a merchandising firm. JOEL COMPANY Income Statement For the Year Ended December 31 Sales revenue (2,000 units x $125) Cost of goods sold (2,000 units x $65) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (2,000 units x $1.00) Net income $ 250,000 (130,000) 120,000 (25,000) (30,000) (20,000) (24,000) (2,000) $ 19,800 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 Joel will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Req A Req B and C Reconstruct the income statement using the contribution margin format. JOEL COMPANY Income Statement For the Year Ended December 31 Less: Variable costs $ Less: Fixed costs $ 0 Complete this question by entering your answers in the tabs below. 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 Joel will earn if sales increase by 10 percent. (Round your intermediate calculations and the final answer for "Operating leverage" to 2 decimal place.) b. C. Operating leverage Net income
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