//newconnect.mheducation.com/fiow/connect.html Seved The following income statem
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//newconnect.mheducation.com/fiow/connect.html Seved The following income statement was drawn from the records of Vernon Company, a merchandising firm: VERNON COHPANY Income Statement For the Year Ended December 31, 2018 Sales revenue (8,000 units x $163) $1,304,000 688.000 616,ee9 (130,400) (86,009) (38,ee0) (41,009) Cost of goods sold (8,000 units $86) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (8,8e8 units x S4) (32,80) Net income 288,600 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 Vernon wall carn fisales increase by 20 percen Complete this question by entering your answers in the tabs below Req A Req B and C Reconstruct the income statement using the contribution margin format lncome Statement Less: Variable costs eh ?? DeLLExplanation / Answer
VERNON Company Income Statement 1 For the year ended Dec 31,2018 Sales (8000*163) 1304000 Less: Variable Costs Cost of Goods(8000*86) 688000 Sales Commission(10% of Sales) 130400 Shipping & Handling Cost(8000*4) 32000 Total Variable Cost 850400 Contribution Margin 4,53,600 Less: Fixed Costs Administrative Expense 86000 Depreciation Expense 41000 Advertising Expense 38000 Total Fixed Cost 165000 Net Operating Income 2,88,600 2 Degree of Operating Leverage: Contribution Margin/NOI 453600/288600 1.57 3 Sales Increase by 20% Increase in Net Income(20*1.57) % Increase in Operating Income 31.4 Current Net Income 2,88,600 Revised Net Income 379220 (288600+(288600*31.4%)
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