East Asian Publications specializes in reference books that keep abreast of the rapidly changing political and economic issues in the Asia-Pacific region. The results of the company's operations during the past year are given below. All units produced during the year were sold. (Ignore income taxes.)

Required:
1. Prepare a traditional income statement and a contribution margin statement for the company.
2. What is the firm's operating leverage factor for the sales volume generated during the past year?
3. Suppose that sales revenue increases by 10 percent. What will be the percentage increase in net profit?
4. Which income statement would an operating manager use to answer requirement 3?

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Sales revenue Manufacturing costs: $2 000 000 Fixed 500 000 1 000 000 Variable Selling costs: Fixed Variable 50 000 Administrative costs: 100 000 Fixed Variable 120 000 30 000