Question
The following income statement applies to Gibson Company for the current year: Income Statement Sales revenue (480 units x $32) Variable cost (480 units
The following income statement applies to Gibson Company for the current year: Income Statement Sales revenue (480 units x $32) Variable cost (480 units x $17) Contribution margin Fixed cost Net income $15,360 (8,160) 7,200 (4,200) $ 3,000 Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Gibson Company will earn if it experiences a 15 percent increase in revenue. The sales price per unit is not affected. c-1. Verify your answer to Requirement b by constructing an income statement based on a 15 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Complete this question by entering your answers in the tabs below. Req A and B Req C1 Req C2 Use the contribution margin approach to calculate the magnitude of operating leverage. Afterwards, use the operating leverage measure previously computed for Requirement A to determine the amount of net income that Gibson Company will earn if it experiences a 15 percent increase in revenue. The sales price per unit is not affected. (Do not round intermediate calculations. Round "Operating leverage" to 2 decimal place.) a. Operating leverage 2.40 b. Net income $ 1,080 Show less A Complete this question by entering your answers in the tabs below. Req A and B Req C1 Req C2 Verify your answer to Requirement b by constructing an income statement based on a 15 percent increase in sales revenue. The sales price is not affected. Annual Income Statement Sales revenue Variable cost Contribution margin Fixed cost Net income $ 15,360 8,160 7,200 4,200 $ 3,000 Complete this question by entering your answers in the tabs below. Req A and B Req C1 Req C2 Calculate the percentage change in net income for the two income statements. Change in net income %
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