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 Vernon Company, a merchandising firm: VERNON COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (5,500 units $168) Cost of goods sold (5,500 units $88) Gross margin Sales commissions (10% of sales) Administrative salaries expense. Advertising expense Depreciation expense. Shipping and handling expenses (5,500 units x $3) Net income $ 924,000 (484,000) 440,000 (92,400) (88,000) (32,000) (41,000) (16,500) $170,100 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 Vernon will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Next