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a. 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 Jordan C earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected.

a. 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 Jordan C earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Income Statement Sales revenue (420 units x $33) Variable cost (420 units x $18) Contribution margin Fixed cost Net income Required $13,860 (7,560) 6,300 (4,300) $2,000 a. 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 Jordan C earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. c-1. Verify your answer to Requirement b by constructing an income statement based on a 20 percent increase in sales re sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Complete this question by entering your answers in the tabs below. Req A and B Req C1 Req C2 a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Afterwards, use the operating leverage measure previously computed for Requirement A to determine the amount of net income that Jordan Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. Note: Do not round intermediate calculations. Round "Operating leverage" to 2 decimal places. Show less
Transcribed Image Text:Income Statement Sales revenue (420 units x $33) Variable cost (420 units x $18) Contribution margin Fixed cost Net income Required $13,860 (7,560) 6,300 (4,300) $2,000 a. 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 Jordan C earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. c-1. Verify your answer to Requirement b by constructing an income statement based on a 20 percent increase in sales re sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Complete this question by entering your answers in the tabs below. Req A and B Req C1 Req C2 a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Afterwards, use the operating leverage measure previously computed for Requirement A to determine the amount of net income that Jordan Company will earn if it experiences a 20 percent increase in revenue. The sales price per unit is not affected. Note: Do not round intermediate calculations. Round "Operating leverage" to 2 decimal places. Show less
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