Exercise 2-13A (Algo) Using contribution margin format income statement to measure the magnitude of operating leverage LO 2-3, 2-4 The following income statement was drawn from the records of Rundle Company, a merchandising firm: RUNDLE COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (7,000 units x $164) $1,148,000 Cost of goods sold (7,000 units x $88) (616,000) Gross margin 532,000 Sales commissions (10% of sales) (114,800) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (7,000 units x $3) Net income (86,000) (30,000) (48,000) (21,000) $232,200 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 Rundle will earn if sales increase by 20 percent. Complete this question by entering your answers in the tabs below. Req A Req B and C Reconstruct the income statement using the contribution margin format. RUNDLE COMPANY Income Statement Conka Vana Badan Danakan 24. Vann A Reconstruct the income statement using the contribution margin format. RUNDLE COMPANY Income Statement For the Year Ended December 31, Year 1 Less: Variable costs Less: Fixed costs < Req A Req B and C > RUNDLE COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (7,000 units x $164) Cost of goods sold (7,000 units x $88) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (7,000 units x $3) Net income Required $1,148,000 (616,000) 532,000 (114,800) (86,000) (30,000) (48,000) (21,000) $232,200 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 Rundle will earn if sales increase by 20 percent. Complete this question by entering your answers in the tabs below. Req A Req B and C b. Calculate the magnitude of operating leverage. c. Use the measure of operating leverage to determine the amount of net income Rundle will earn if sales increase by 20 percent. Note: 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 < Req A Req B and C > Show less