Over the short run, operating costs that do not vary directly with sales are called costs. However, over the long run, all costs are Consider the cost structure of European Satellite Corporation: Review the traditional format income statement for European Satellite Corporation that follows, and classify the indicated costs as being fixed, semivariable, or variable in nature. European Satellite Corporation Income Statement for the Year Ending December 31 Type of cost Net sales $7,464,285 Cost of goods sold: Direct materials Direct labor 2,239,286 1,716,786 Overhead expenses: Rent expense Electric utility expense Total cost of goods sold 223,929 298,571 4,478,572 2,985,713 Gross profit 149,286 447,857 Operating expenses: Shipping and delivery expenses Depreciation on buildings and property Total operating expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) 597,143 2,388,570 298,571 Taxes (35%) Net income 2,089,999 731,500 $1,358,499 231,393 $1,127,106 Preferred stock dividends Earnings available to common shareholders Given your findings for European Satellite Corporation above, construct an income statement using the revised format. For simplicity's sake--and for this portion of the problem only-assume the following: Any semivariable cost is composed of a 50% variable-cost component and a 50% fixed-cost component. (Remember, in actuality, these percentages will differ depending on the source of the cost.) All of the company's tax expense consists of sales and income taxes, and thus, varies proportionately with European Satellite's sales. European Satellite Corporation Income Statement for the Year Ending December 31 Net sales $7,464,285 2,388,570 Less: Variable operating costs Fixed operating costs Total operating costs Earnings before interest and taxes (EBIT) Less: Fixed capital costs Earnings before taxes (EBT) Less: Income taxes (Variable, 35%) Earnings after taxes (EAT) Less: Fixed capital costs (preferred stock dividends) Earnings available to common shareholders Earnings per share (EPS) 400,000 shares 2,089,999 $1,358,499