ZACHARY COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (4,000 units × $168) $ 672,000 Cost of goods sold (4,000 units × $88) (352,000) Gross margin 320,000 Sales commissions (10% of sales) (67,200) Administrative salaries expense (85,000) Advertising expense (32,000) Depreciation expense (49,000) Shipping and handling expenses (4,000 units × $1) (4,000) Net income $ 82,800 Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Zachary will earn if sales increase by 10 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.)
ZACHARY COMPANY Income Statement For the Year Ended December 31, Year 1 Sales revenue (4,000 units × $168) $ 672,000 Cost of goods sold (4,000 units × $88) (352,000) Gross margin 320,000 Sales commissions (10% of sales) (67,200) Administrative salaries expense (85,000) Advertising expense (32,000) Depreciation expense (49,000) Shipping and handling expenses (4,000 units × $1) (4,000) Net income $ 82,800 Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Zachary will earn if sales increase by 10 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The following income statement was drawn from the records of Zachary Company, a merchandising firm:
| ZACHARY COMPANY | |||
| Income Statement | |||
| For the Year Ended December 31, Year 1 | |||
| Sales revenue (4,000 units × $168) | $ | 672,000 | |
| Cost of goods sold (4,000 units × $88) | (352,000) | ||
| Gross margin | 320,000 | ||
| Sales commissions (10% of sales) | (67,200) | ||
| Administrative salaries expense | (85,000) | ||
| Advertising expense | (32,000) | ||
| (49,000) | |||
| Shipping and handling expenses (4,000 units × $1) | (4,000) | ||
| Net income | $ | 82,800 | |
Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Zachary will earn if sales increase by 10 percent. (Round your intermediate calculations and "Operating leverage" answer to 2 decimal places. Round the "Net income" value to nearest whole dollar.)
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