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Problem: Module 5 Textbook Problem 6 Learning Objectives: . 5-5 Prepare an income statement using the contribution margin approach . 5-6 Calculate the magnitude of
Problem: Module 5 Textbook Problem 6 Learning Objectives: . 5-5 Prepare an income statement using the contribution margin approach . 5-6 Calculate the magnitude of operating leverage The following income statement was drawn from the records of Benson, a merchandising firm: BENSON COMPANY Income Statement For the Year Ended December 31 Sales revenue (5,000 units $165) $ 825,000 Cost of goods sold (5,000 units $82) (410, eee) Gross margin 415,000 Sales commissions (10% of sales) (82,500) Administrative salaries expense (83,000) Advertising expense (34,000) Depreciation expense (46,000) Shipping and handling expenses (5,000 units $4) (20,680) Net income $ 149,500 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 Benson will earn if sales increase by 20 percent Req A Req B and C Reconstruct the income statement using the contribution margin format. BENSON COMPANY Income Statement For the Year Ended December 31 Less: Variable costs Less Fixed costs Rea Band Req A Req B and Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Benson will earn if sales increase by 20 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 C Net income
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