The following income statement was drawn from the records of Baird Company, a merchandising firm: BAIRD COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (5,000 units $163) Cost of goods sold (5,000 units $90) 11 Gross margin $ 815,000 (450,000) 365,000 (81,500) Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (5,000 units $2) Net income (87,000) (35,000) (45,000) (10,000) $ 106,500 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 Baird will earn if sales increase by 20 percent.