Exercise 2-13A 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 Stuart Company, a merchandising firm: STUART COMPANY Income Statement For the Year Ended December 31, 2018 Sales revenue (8,000 units X $170) $1,360,000 Cost of goods sold (8,000 units * $81) (648,000) Gross margin 712,000 Sales commissions (10% of sales) (136,000) Administrative salaries expense (89,000) Advertising expense (31,000) Depreciation expense (41,000) Shipping and handling expenses (8,000 units (8,000) x $1 ) Net income $ 407,000 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 Stuart will earn if sales increase by 20 percent. Complete this question by entering your answers in the tabs below. Required A Req B and C Reconstruct the income statement using the contribution margin format. STUART COMPANY Income Statement For the Year Ended December 31, 2018 Less: Variable costs Less: Fixed costs Complete this question by entering your answers in the tabs below. Required A Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Stuart will earn if sales increase by 20 percent. (Round intermediate and "Operating leverage" answer to 2 decimal places.) b. times Operating leverage Net income