Exercise 11-15 Using contribution margin format income statement to measure the magnitude of operating leverage LO 11-3, 11-4 The following income statement was drawn from the records of Butler Company, a merchandising firm: BUTLER COMPANY Income Statement For the Year Ended December 31, 2014

Sales revenue (2,000 units $275) $ 550,000

Cost of goods sold (2,000 units $146) (292,000 )

Gross margin 258,000

Sales commissions (10% of sales) (55,000 )

Administrative salaries expense (80,000 )

Advertising expense (38,000 )

Depreciation expense (50,000 )

Shipping and handling expenses (2,000 units $1.50) (3,000 )

Net income $ 32,000

Required

a. Reconstruct the income statement using the contribution margin format.

b. Calculate the magnitude of operating leverage. (Round your answer to 2 decimal places.)

c. Use the measure of operating leverage to determine the amount of net income Butler will earn if sales increase by 10 percent. (Do not round intermediate calculations.)