Exercise 2-13A (Algo) Using contribution margin format income statement to measure the magnitude of operating leverage LO 2-3, 2-4 The following income statement was drawn from the records of Vernon Company, a merchandising firm: VERNON COMPANY Income Statement For the Year Ended December 31, Year 11 Sales revenue (6,000 units $162) $972,000 Cost of goods sold (6,000 units $06) (516,000) Gross margin- Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (6,000 units * $2) Net income 456,000 (48,600) (87,000) (32,000) (48,000) (12,000) $228,400 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 Vernon 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. VERNON COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue Less: Variable costs Cost of goods sold Sales commissions Shipping and handling expenses. Contribution margin Less: Fixed costs Administrative salaries Advertising expense Depreciation expense Net income $ Req A Req B and C > 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 Vernon 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 Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Vernon will earn if sales increase by 10 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.) b. Operating leverage a Net income < Req A Ren and C