The following income statement applies to Cohen Company for the current year.


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The following income statement applies to Cohen Company for the current year. 1 answer below » Assessing the magnitude of operating leverage The following income statement applies to Cohen Company for the current year. Sales revenue (350 units x $25) $8,750 Variable cost (350 units x $10) 3,500 Contribution margin Fixed costs 5,250 (3,500) Net income $1,750 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 Cohen Company will earn if it experiences a 10 percent increase in revenue. The sales View complete question » Assessing the magnitude of operating leverage The following income statement applies to Cohen Company for the current year. Sales revenue (350 units x $25) $8,750 Variable cost (350 units x $10) 3,500 Contribution margin Fixed costs 5,250 (3,500) Net income $1,750 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 Cohen Company will earn if it experiences a 10 percent increase in revenue. The sales price per unit is not affected. c. Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. Calculate the percentage change in net income for the two income statements. View less » Jul 24 2014 07:52 AM

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