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The following income statement applies to Munoz Company for the current year: Income Statement Sales revenue (440 units x $34) Variable cost (440 units x $19) Contribution margin Fixed cost 3 Net income $14,960 (8,360) 6,600 (4,400) $2,200 Required 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 Munoz Company will earn if it experiences a 10 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 10 percent increase in sales revenue. The 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 Munoz Company will earn if it experiences a 10 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. a. Operating leverage L Show less A

The following income statement applies to Munoz Company for the current year: Income Statement Sales revenue (440 units x $34) Variable cost (440 units x $19) Contribution margin Fixed cost 3 Net income $14,960 (8,360) 6,600 (4,400) $2,200 Required 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 Munoz Company will earn if it experiences a 10 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 10 percent increase in sales revenue. The 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 Munoz Company will earn if it experiences a 10 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. a. Operating leverage L Show less A

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 16E
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The following income statement applies to Munoz Company for the current year: Income Statement Sales revenue (440 units x $34) Variable cost (440 units x $19) Contribution margin Fixed cost 3 Net income $14,960 (8,360) 6,600 (4,400) $2,200 Required 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 Munoz Company will earn if it experiences a 10 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 10 percent increase in sales revenue. The 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 Munoz Company will earn if it experiences a 10 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. a. Operating leverage L Show less A
Transcribed Image Text:The following income statement applies to Munoz Company for the current year: Income Statement Sales revenue (440 units x $34) Variable cost (440 units x $19) Contribution margin Fixed cost 3 Net income $14,960 (8,360) 6,600 (4,400) $2,200 Required 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 Munoz Company will earn if it experiences a 10 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 10 percent increase in sales revenue. The 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 Munoz Company will earn if it experiences a 10 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. a. Operating leverage L Show less A
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