Exercise 2-8A (Algo) Fixed versus variable cost behavior LO 2-1 Zachary Entertainment sells souvenir T-shirts at each rock concert that it sponsors. The shirts cost $9 each. Any excess shirts can be returned to the manufacturer for a full refund of the purchase price. The sales price is $28 per shirt. Required a. What are the total cost of shirts and cost per shirt if sales amount to 6.000, 6,500, 7000, 7500, or 8.000? b. Is the cost of T-shirts a fixed or a variable cost? Complete this question by entering your answers in the tabs below. Required A Required B Is the cost of T-shirts a fixed or a variable cost? S o the total cost of shirts in Requrement A portionately to the number of shorts sold, Aisa Required A 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 Adams Company, a merchandising firm: ADAMS COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (4,500 units X $161) Cost of goods sold (4,5ee units * $83) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (4,500 units x $1) Net income $724,500 (373, See) 351,000 (72,450) (84,000) (34,690) (42,000) (4,500) $ 114,050 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 Adams 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 Req A Req B and C Reconstruct the income statement using the contributi ADAMS COMPANY Income Statement For the Year Ended December 31, Year 1 Less: Variable costs Less: Fixed costs Complete this question by entering your answers in the tabs below. ReqA Req B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Adams will earn if sales increase by 20 percent. (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