The following income statement applies to Nagano Company for the current year:

Income Statement
Sales revenue (460 units $39)	$	17,940
Variable cost (460 units $24)		(11,040	)
Contribution margin		6,900
Fixed cost		(4,900	)
Net income	$	2,000

Required:
a.	Use the contribution margin approach to calculate the magnitude of operating leverage. (Round your answer to 2 decimal places.)

b.	Use the operating leverage measure computed in Requirement a to determine the amount of net income that Nagano Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. (Do not round intermediate calculations.)

c-1.	Verify your answer to Requirement b by constructing an income statement based on a 20 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.

The following income statement applies to Nagano Company for the current year Income Statement Sales revenue (460 units x $39) 17,940 Variable cost (460 units x $24) (11,040) Contribution margin Fixed cost 6,900 (4,900) Net income $ 2,000 Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. (Round your answer to 2 decimal places.) rating leverage 3.45 b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Nagano Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. (Do not round intermediate calculations.) Net income 3,380 c- Verify your answer to Requirement b by constructing an income statement based on a 20 percent 1. increase in sales revenue. The sales price is not affected Annual Income Statement Sales revenue Variable cost Contribution margin Fixed cost Net income 2. Calculate the percentage change in net income for the two income statements Change in net income References eBook & Resources Worksheet Difficulty: 3 Hard