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Exercise 2-14A Assessing the magnitude of operating leverage LO 2-4 The following income statement applies to Nagano Company for the current year: Income Statement Sales
Exercise 2-14A Assessing the magnitude of operating leverage LO 2-4 The following income statement applies to Nagano Company for the current year: Income Statement Sales revenue (250 units x $60) $15,000 Variable cost (250 units $36) (9,000) Contribution margin Fixed cost 6,000 (2,000) Net income 4,000 Required: a. Use the contribution margin approach to calculate the magnitude of operating leverage. (Round your answer to 1 decimal place.) Cperating leverage 1.5 b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Nagano Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not ffected. (Do not round intermediate calculations.) Net inocms
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