The following income statement was drawn from the records of Finch Company, a merchandising firm: FINCH COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (5,500 units x $168) Cost of goods sold (5,500 units $89) Gross margin Sales commissions (5% of sales) Administrative salaries expense Required Advertising expense Depreciation expense Shipping and handling expenses (5,500 units x $5) Net income $924,000 (489,500) 434,500 (46,200) (86,000) (37,000) (40,000) (27,500) $197,800 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 Finch will earn if sales increase by 20 percent.

a. Reconstruct the income stotement using the contribution margin format. b. Calculate the magnifude of operating leverage. c. Use the measure of operating leverage to determine the amount of net income Finch will earn if sales increase by 20 percent