LO 2-3, 2-4 Exercise 2-134 Using contribution margin format income statement to measure the of operating leverage The following income statement was drawn from the records of Joel Company, a merchandising firm: JOEL COMPANY Income Statement For the Year Ended December 31, 2018 Sales revenue (2,000 units x $125) Cost of goods sold (2,000 units x $65) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (2,000 units x $1.00) Net Income $ 250,000 (130,000 120,000 (25,000) (30,000) (20,000) (24,000) (2.000) $ 19,000 Chapter 2 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 some Joel will earn if sales increase by 10 percent. LO 2-4 Exercise 2-14A Assessing the magnitude of operating leveres The following income statement applies to Kawai Company for the current year: Income Statement Sales revenue (200 units x $60) Variable cost (200 units x $36) Contribution margin Fixed costs Net income $12,000 (7.200) 4,800 (1.600) $ 3,200 Required . Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Kawai will earn if it experiences 10 percent increase in revenue. The sales price per unit is c. Verify your irement b by constry increase in income ulate me statements Exercis Mour The sales price is LO 2-5 e statement based on a 10 percent age change in net ar eraging costs hc.leases the that requis ed to be Il ye wild pas ring opening of providing pers Chapter 2 antat. Required a. Reconstruct the income statement using the contri b. Calculate the magnitude of operating leverage c. Use the measure of operating leverage to del sales increase by 10 percent. - income Joell carn if Leituda afanerating mere