Using a contribution margin format income statement to measure the magnitude of operating leverage


Question Description:

30

Using a contribution margin format income statement to measure the magnitude of operating leverage 1 answer below » Using a contribution margin format income statement to measure the magnitude of operating leverage The following income statement was drawn from the records of Bechem Company, a merchandising firm. View complete question » BECHEM COMPANY Income Statement For the Year Ended December 31, 2008 Sales revenue (3,500 units x $123) $430,500 Cost of goods sold (3,500 units x $68) (238,000) Gross margin 192,500 Sales commissions (10% of sales) (43,050) Administrative salaries expense (61,500) Advertising expense (22,000) Depreciation Using a contribution margin format income statement to measure the magnitude of operating leverage The following income statement was drawn from the records of Bechem Company, a merchandising firm. BECHEM COMPANY Income Statement For the Year Ended December 31, 2008 Sales revenue (3,500 units x $123) $430,500 Cost of goods sold (3,500 units x $68) (238,000) Gross margin 192,500 Sales commissions (10% of sales) (43,050) Administrative salaries expense (61,500) Advertising expense (22,000) Depreciation expense (25,000) Shipping and handling expenses (3,500 units x $4.00) (14,000) Net income $ 26,950 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 Bechem will earn if sales increase by 10 percent. View less » Jul 24 2014 07:52 AM

Answer

30