The following income statement was drawn from the records of Adams Company, a merchandising firm:

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 Adams will earn if sales increase by $20$ per

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Reconstruct the income statement using the contribution margin format.

ADAMS COMPANY

Income Statement

For the Year Ended December $31,$ Year $1$