Saved The following income statement was drawn from the records of Walton Company, a merchandising firm: WALTON COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (5,000 units $165) Cost of goods sold (5,000 units $89) Gross margin Sales commissions (10% of sales) $825,000 (445,000) Administrative salaries expense Advertising expense 380,000 (82,500) (85,000) (32,000) (50,000) Shipping and handling expenses (5,000 units $4)) (20,000) $107,500 Depreciation expense Net income 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 Walton will earn if sales increase by 10 percent.