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

                        JOEL COMPANY

                    Income Statement

For the Year Ended December 31, 2018

Sales revenue (2,000 units × $125)....................................................... $250,000

Cost of goods sold (2,000 units × $65)...................................................(130,000)

Gross margin................................................................................................120,000

Sales commissions (10% of sales)............................................................ (25,000)

Administrative salaries expense................................................................(30,000)

Advertising expense...................................................................................(20,000)

Depreciation expense................................................................................(24,000)

Shipping and handling expenses (2,000 units × $1.00)...........................(2,000)

Net income.................................................................................................$ 19,000

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 Joel will earn if sales increase by 10 percent.