EXHIBIT 1-7 Comparing Traditional and Contribution Format Income Statements for Merchandising Companies (all numbers are given) "For a manufacturing company, the cost of goods sold would include some variable costs, such as direct materials, direct labor, and variable overhead, and some fixed costs, such as fixed manufacturing overhead. Income statement formats for manufacturing companies will be explored in greater detall in a subsequent chapter \begin{tabular}{cc} Cost of \\ goods sold & \begin{tabular}{c} Beginning \\ merchandise \end{tabular}+ Purchases - merchandise \\ inventory \end{tabular} CostofgoodssoldBeginningmerchandise+PurchasesEndingmerchandise=$7,000+$3,000$4,000=$6,000 1. Now change all of the dollar amounts in the data area of your worksheet so that it looks like this: If your formulas are correct, you should get the correct answers to the following questions. (a) What is the gross margin now? (b) What is the net operating income now? (c) What is the contribution margin now