Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The following income statement was drawn from the records of Franklin Company, a merchandising firm: FRANKLIN COMPANY Income Statement For the Year Ended December 31,
The following income statement was drawn from the records of Franklin Company, a merchandising firm: FRANKLIN COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (8,000 units * $160) $1,280,000 Cost of goods sold (8,000 units * $81) (648,000) Gross margin 632,000 Sales commissions (10% of sales) (128,000) Administrative salaries expense (87,000) Advertising expense (38,000) Depreciation expense (43,000) Shipping and handling expenses (8,000 units * $5) (40,000) Net income $ 296,000 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 Franklin will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Req A Req B and C Reconstruct the income statement using the contribution margin format. FRANKLIN COMPANY Income Statement For the Year Ended December 31, Year 1 Less: Variable costs Less: Fixed costs Reg A Req B and C > 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 Franklin will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Req A Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Franklin will earn if sales increase by 10 percent. (Round your intermediate calculations and Operating leverage" answer to decimal places. Round the "Net income" value to nearest whole dollar.) *************** b. Operating leverage Net income C
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started