MUNOZ COMPANY Income Statement For the Year Ended December 31 Sales revenue (6,500 units x $164) Cost of goods sold (6,500 units x $82) Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (6,500 units x $3) $1,066,000 (533,000) 533,000 (53,300) (83,000) (33,000) (41,000) (19,500) $ 303,200 Net income 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 net income Munoz will earn if sales increase by 10 percent.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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MUNOZ COMPANY
Income Statement
For the Year Ended December 31
Sales revenue (6,500 units x $164)
Cost of goods sold (6,500 units x $82)
Gross margin
Sales commissions (5% of sales)
Administrative salaries expense
Advertising expense
Depreciation expense
Shipping and handling expenses (6,500 units x $3)
$1,066,000
(533,000)
533,000
(53,300)
(83,000)
(33,000)
(41,000)
(19,500)
$303,200
Net income
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 net income Munoz will earn if sales increase by 10 percent.
Complete this question by entering your answers in the tabs below.
Reg A
Req B and C
Reconstruct the income statement using the contribution margin format.
MUNOZ COMPANY
Income Statement
For the Year Ended December 31
Less: Variable costs
Less: Fixed costs
Transcribed Image Text:MUNOZ COMPANY Income Statement For the Year Ended December 31 Sales revenue (6,500 units x $164) Cost of goods sold (6,500 units x $82) Gross margin Sales commissions (5% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (6,500 units x $3) $1,066,000 (533,000) 533,000 (53,300) (83,000) (33,000) (41,000) (19,500) $303,200 Net income 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 net income Munoz will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Reg A Req B and C Reconstruct the income statement using the contribution margin format. MUNOZ COMPANY Income Statement For the Year Ended December 31 Less: Variable costs Less: Fixed costs
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Variable costs are those costs which changes with change in level of activity. Fixed costs are costs that will not change with change in level of activity.

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