.5-5 Prepare an income statement using the contribution margin approach . 5-6 Calculate the magnitude of...
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.5-5 Prepare an income statement using the contribution margin approach . 5-6 Calculate the magnitude of operating leverage The following income statement was drawn from the records of Benson, a merchandising firm: BENSON COMPANY Income Statement For the Year Ended December 31 Sales revenue (7,500 units $168) Cost of goods sold (7,500 units $82) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (7,500 units $3) Net income $1,260,000 (615,000) 645,000 (126,000) (87,000) (31,000) (44,000) (22,500) $ 334,500 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 Benson will earn if sales increase by 20 percent. Req A Req B and C Reconstruct the income statement using the contribution margin format. BENSON COMPANY Income Statement For the Year Ended December 31 Sales revenue $ 1,260,000 ( Less: Variable costs Cost of goods sold 615,000 Sales commissions 126,000 Shipping and handling expenses 22,500 Contribution margin 496,500 Less: Fixed costs Administrative salaries 87,000 Advertising expense 31,000 Depreciation expense 44,000 Net income $ 334,500 c. Use the measure of operating leverage to determine the amount of net income Benson will earn if sales increase by 20 percent. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Benson will earn if sales increase by 20 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.) b. Operating leverage C Net income $ 1.48 339,451 < Req A Req B and C > .5-5 Prepare an income statement using the contribution margin approach . 5-6 Calculate the magnitude of operating leverage The following income statement was drawn from the records of Benson, a merchandising firm: BENSON COMPANY Income Statement For the Year Ended December 31 Sales revenue (7,500 units $168) Cost of goods sold (7,500 units $82) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (7,500 units $3) Net income $1,260,000 (615,000) 645,000 (126,000) (87,000) (31,000) (44,000) (22,500) $ 334,500 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 Benson will earn if sales increase by 20 percent. Req A Req B and C Reconstruct the income statement using the contribution margin format. BENSON COMPANY Income Statement For the Year Ended December 31 Sales revenue $ 1,260,000 ( Less: Variable costs Cost of goods sold 615,000 Sales commissions 126,000 Shipping and handling expenses 22,500 Contribution margin 496,500 Less: Fixed costs Administrative salaries 87,000 Advertising expense 31,000 Depreciation expense 44,000 Net income $ 334,500 c. Use the measure of operating leverage to determine the amount of net income Benson will earn if sales increase by 20 percent. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Benson will earn if sales increase by 20 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.) b. Operating leverage C Net income $ 1.48 339,451 < Req A Req B and C >
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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds
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