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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 operating leverage
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 Franklin, a merchandising firm: TURLIN COMPANY Income Statement For the Year Ended December 31 Sales revenue (6.000 units 5160) 5960,000 Cost of goods sold (6,000 units $34) (500,000 Gross margin 455,000 Sales comissions (5 of sales) (48,000) Adsinistrative salaries expense (10,000) Advertising expense (3,000) Depreciation expense (41,000) Shipping and handling expenses (6,000 units 53) (18.000) Net Income $ 236,000 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 Franklin 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. FRANKLIN COMPANY Income Statement For the Year Ended December 31 Less: Variable costs 0 Less: Fixed costs S 0 b. Operating leverage Net income C
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