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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 Fanning Company, a merchandising firm: FANNING COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (5,588 units $166) Cost of goods sold (5,500 units X $83) Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (5,580 units * $1) Net income $913, eae (456,50e) 456,500 (45,650) (83, eee) (35, eae) (44,80e) (5.500) $ 243.358 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 Fanning will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Req A Reg B and a Reconstruct the income statement using the contribution margin format. FANNING COMPANY Income Statement For the Year Ended December 31, Year 1 Less: Variable costs Less: Fixed costs Red Req B and C > Complete this question by entering your answers in the tabs below. Reg A Reg B and C Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Fanning will earn if sales increase by 10 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