b. Explain why the total cost per trophy decreases as the number of trophies increases. Problem 11-2 The following income statement was drawn from the records of Seaver Company, a merchandising firm Sales Revenue Cost of Goods Sold Gross Margin Sales Commissions Administrative salaries expense Advertising Expense Depreciation Expense Shipping and Handling Net Income 3,240,000 1,530,000 1,710,000 (292,500) (337,500) (180,000) (337,500) 306,000 REQUIRED a. Reconstruct the income statement using the contribution margin format. Assume COGS is variable and Advertising fixed. b. Calculate the magnitude of operating leverage c. Use the measure of operating leverage to determine the amount of net income Seaver will earn if sales increase by 10 percent