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The following income statement applies to Rundle Company for the current year: Income Statement Sales revenue (440 units $36) Variable cost (440 units *
The following income statement applies to Rundle Company for the current year: Income Statement Sales revenue (440 units $36) Variable cost (440 units * $21) Contribution margin Fixed cost Net income $15,840 (9,240) 6,600 (4,600) $ 2,000 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 Rundle 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 Rundle 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 2 decimal place.) Operating leverage b. Net income RegA and f Req C1 > Show less
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