The following income statement was drawn from the records of Solomon, a merchandising firm:

SOLOMON COMPANY
Income Statement
For the Year Ended December 31
Sales revenue (6,000 units $169)	$	1,014,000
Cost of goods sold (6,000 units $85)		(510,000	)
Gross margin		504,000
Sales commissions (5% of sales)		(50,700	)
Administrative salaries expense		(83,000	)
Advertising expense		(38,000	)
Depreciation expense		(46,000	)
Shipping and handling expenses (6,000 units $4)		(24,000	)
Net income	$	262,300

Required

Reconstruct the income statement using the contribution margin format.

Calculate the magnitude of operating leverage.

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

Complete this question by entering your answers in the tabs below. Reconstruct the income statement using the contribution margin format. Complete this question by entering your answers in the tabs below. Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Solomon will earn if sales increase by 20 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.)