The following income statement was drawn from the records of Zachary, a merchandising firm: ZACHARY COMPANY Income Statement For the Year Ended December 31 Sales revenue (7,000 units x $163) $1,141,000 Cost of goods sold (7,000 units x $89) (623,000) 518,000 Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (7,000 units $3) Net income. (57,050) (89,000) (40,000) (43,000) (21,000) $ 267,950 Required 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 Zachary will earn if sales increase by 20 percent. Req A Req B and C Reconstruct the income statement using the contribution margin format. ZACHARY COMPANY Income Statement For the Year Ended December 31 Less: Variable costs Less: Fixed costs b. Calculate the magnitude of operating leverage. c. Use the measure of operating leverage to determine the amount of net income Zachary will earn if sales increase by 20 percent. Complete this question by entering your answers in the tabs below. Req Al Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Zachary 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.) b. Operating leverage C Net income