Techtronics Software, Inc. specializes in customized spreadsheet software. The results of the companys operations during the prior year (20xx) are given in the following table. All units produced during the year were sold. (Ignore income taxes.)

Sales revenue		$ 3,000,000
Manufacturing costs:
Fixed		500,000
Variable		1,000,000
Selling costs:
Fixed		50,000
Variable		100,000
Administrative costs:
Fixed		120,000
Variable		30,000

Required:

1. Prepare a traditional income statement and a contribution income statement for the company.

2. What is the firms operating leverage for the sales volume generated during the prior year?

3. Suppose sales revenue increases by 20 percent. What will be the percentage increase in net income?

4. Which income statement would an operating manager use to answer requirement (3)? Why?