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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,
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 (5,000 units $162) $ 810,000 Cost of goods sold (5,000 units $84) (420,000 ) ________________________________________ ________________________________________ ________________________________________ Gross margin 390,000 Sales commissions (10% of sales) (81,000 ) Administrative salaries expense (89,000 ) Advertising expense (32,000 ) Depreciation expense (47,000 ) Shipping and handling expenses (5,000 units $3) (15,000 ) ________________________________________ ________________________________________ ________________________________________ Net income $ 126,000 The operating leverage is 2.3 times. Question 1. Use the measure of operating leverage to determine the amount of net income Butler will earn if sales increase by 10 percent
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