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

RUNDLE COMPANY
Income Statement
For the Year Ended December 31, 2018
Sales revenue (7,000 units $163)	$	1,141,000
Cost of goods sold (7,000 units $84)		(588,000	)
Gross margin		553,000
Sales commissions (10% of sales)		(114,100	)
Administrative salaries expense		(80,000	)
Advertising expense		(38,000	)
Depreciation expense		(47,000	)
Shipping and handling expenses (7,000 units $2)		(14,000	)
Net income	$	259,900

Required

Reconstruct the income statement using the contribution margin format.

Calculate the magnitude of operating leverage.

Use the measure of operating leverage to determine the amount of net income Rundle will earn if sales increase by 20 percent.

Reconstruct the income statement using the contribution margin format.

RUNDLE COMPANY
Income Statement
For the Year Ended December 31, 2018
Less: Variable costs
Less: Fixed costs

Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Rundle will earn if sales increase by 20 percent. (Round intermediate and "Operating leverage" answer to 2 decimal places.)

b.	Operating leverage		times
c.	Net income