The following income statement was drawn from the records of Butler Company, a merchandising firm: BUTLER COMPANY Income Statement For the Year Ended December 31, 2014

Sales revenue (7,500 units x $169) $ 1,267,500

Cost of goods sold (7,500 units x $84) (630,000 )

Gross margin 637,500

Sales commissions (5% of sales) (63,375 )

Administrative salaries expense (85,000 )

Advertising expense (36,000 )

Depreciation expense (41,000 )

Shipping and handling expenses (7,500 units x $4) (30,000 )

Net income $ 382,125

a.

Reconstruct the income statement using the contribution margin format.

.

b. Calculate the magnitude of operating leverage

c.	Use the measure of operating leverage to determine the amount of net income Butler will earn if sales increase by 20 percent