Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The following income statement applies to Rooney Company for the current year: Income Statement Sales revenue (470 units * $37) Variable cost (470 units *
The following income statement applies to Rooney Company for the current year: Income Statement Sales revenue (470 units * $37) Variable cost (470 units * $22) Contribution margin Fixed cost Net income $ 17,390 (10,340) 7,050 (4,700) $ 2,350 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 Rooney Company will earn if it experiences a 10 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 10 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 Rooney Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not affected. (Do not round intermediate calculations. Round "Operating leverage" to 1 decimal place.) Show less a. times Operating leverage Net income b. Complete this question by entering your answers in the tabs below. Req A and B Req c1 Reg C2 Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. Annual Income Statement Sales revenue Variable cost Contribution margin Fixed cost 0 Net income $ 0 Complete this question by entering your answers in the tabs below. Reg A and B Req c1 Reg C2 Calculate the percentage change in net income for the two income statements. Change in net income %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started