Question

The following income statement applies to Nagano Company for the current year:
Income Statement
Sales revenue (250 units 3 $60) ...... $15,000
Variable cost (250 units 3 $36) ...... (9,000)
Contribution margin ........... 6,000
Fixed costs ................ (2,000)
Net income ................ $ 4,000

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 Nagano 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.



$1.99
Sales8
Views584
Comments0
  • CreatedFebruary 07, 2014
  • Files Included
Post your question
5000