The following income statement was drawn from the records of Ulrich 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 Ulrich will earn if sales increase by 10 percent. 

Transcribed Image Text:

ULRICH COMPANY Income Statement For the Year Ended December 31, 2011 Sales revenue (4,000 units x $150) Cost of goods sold (4,000 units × $80) $600,000 (320,000) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (4,000 units X $1) 280,000 (60,000) (90,000) (40,000) (50,000) (4,000) $ 36,000 Net income