The following budgeted income statement applies to Johnson Company:

Income Statement

Sales revenue (1,000 units × $89)...............................$ 89,000

Variable cost (1,000 units × $50).................................(50,000)

Contribution margin.................................................39,000

Fixed costs..........................................................(26,000)

Net income.........................................................$ 13,000

Required

a. Use the Contribution margin approach to calculate the magnitude of operating leverage.

b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Johnson Company will earn if sales volume increases by 10 percent. Assume the sales price per unit remains unchanged at $89.

c. Verify your answer to Requirement b by constructing an alternative income statement based on a 10 percent increase in sales volume. The sales price per unit remains unchanged at $89. Calculate the percentage change in net income for the two income statements.