Exercise 2-14A (Algo) Assessing the magnitude of operating leverage LO 2-4 The following income statement applies to Stuart Company for the current year: Income Statement Sales revenue (460 units x $39) $ 17,946 Variable cost (460 units x $24) (11,046) Contribution margin 6,963 Fixed cost (4.9%) Net income $ 2.0% ' Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Stuart Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. :4. Verify your answer to Requirement b by constructing an income statement based on a 20 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Complete this questlon by entering your answers In the tabs below. Req A and B Req C1 Req C2 Use the contribution margin approach to calculate the magnitude of operating leverage. AftenNards, use the operating leverage measure previously computed for Requirement A to determine the amount of net income that Stuart Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. (Do not round intermediate calculations. Round "Operating leverage" to 2 decimal place.) Show lessA _ Hw The following income statement applies to Stuart Company for the current year: Income Statement Sales revenue {460 units x $39) $ 17,948 Variable cost {460 units x $24) (11,048) Contribution margin 6,960 Fixed cost (4.9%) Net income $ 2.666 ' Required 3. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Stuart Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. c-1. Verify your answer to Requirement b by constructing an income statement based on a 20 percent increase in sales revenue. The sales price is not affected. c-Z. Calculate the percentage change in net income for the two income statements. Complete thls question by entering your answers In the tabs below. Req A and B Verify your answer to Requirement b by constructing an income statement based on a 20 percent increase in sales revenue. The sales price is not affected. Sales revenue Variable cost Contribution margin Net income Complete this question by entering your answers in the tabs below. Req A and B Req C1 Req C2 Calculate the percentage change in net income for the two income statements. Change in net income %