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The following income statement applies to Vernon Company for the current year: Income Statement Sales revenue (540 units x $41) Variable cost (540 units x
The following income statement applies to Vernon Company for the current year: Income Statement Sales revenue (540 units x $41) Variable cost (540 units x $26) Contribution margin Fixed cost Net income $ 22,140 (14,040) 8,100 (5,100) $ 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 Vernon 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. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A and B Requirement Requirement C1 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 $ 27,897 X Variable cost (17,690) X Contribution 10,207 margin Fixed cost (5,100) Net income $ 5,107
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