FRANKLIN COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (6,000 units x $168) Cost of goods sold (6,000 units × $88) Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (6,000 units × $2) Net income Required $1,008,000 (528,000) 480,000 (50,400) (84,000) (33,000) (42,000) (12,000) $258,600 . Reconstruct the income statement using the contribution margin format. p. Calculate the magnitude of operating leverage. • Use the measure of operating leverage to determine the amount of net income Franklin will earn if sales increase by 20 percent

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question

Please do not give solution in image format thanku 

The following income statement was drawn from the records of Franklin Company, a merchandising firm:
FRANKLIN COMPANY
Income Statement
For the Year Ended December 31, Year 1
Sales revenue (6,000 units × $168)
Cost of goods sold (6,000 units × $88)
Gross margin
Sales commissions (5% of sales)
Administrative salaries expense
Advertising expense
Depreciation expense
Shipping and handling expenses (6,000 units × $2)
Net income
Required
$1,008,000
(528,000)
480,000
(50,400)
(84,000)
(33,000)
(42,000)
(12,000)
$258,600
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 Franklin will earn if sales increase by 20 percent.
Transcribed Image Text:The following income statement was drawn from the records of Franklin Company, a merchandising firm: FRANKLIN COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (6,000 units × $168) Cost of goods sold (6,000 units × $88) Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (6,000 units × $2) Net income Required $1,008,000 (528,000) 480,000 (50,400) (84,000) (33,000) (42,000) (12,000) $258,600 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 Franklin will earn if sales increase by 20 percent.
Req A
Reconstruct the income statement using the contribut
FRANKLIN COMPANY
Income Statement
For the Year Ended December 31, Year 1
Less: Variable costs
Less: Fixed costs
Req A
Req B and C
Req B and C
b. Calculate the magnitude of operating leverage.
c. Use the measure of operating leverage to determine the amount of net income Franklin will earn if sales increase by 20
percent.
Note: 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
Show less
Transcribed Image Text:Req A Reconstruct the income statement using the contribut FRANKLIN COMPANY Income Statement For the Year Ended December 31, Year 1 Less: Variable costs Less: Fixed costs Req A Req B and C Req B and C b. Calculate the magnitude of operating leverage. c. Use the measure of operating leverage to determine the amount of net income Franklin will earn if sales increase by 20 percent. Note: 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 Show less
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education