FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Exercise 11-15A (Static) Using contribution margin format income statement to measure the magnitude
of operating leverage LO 11-3, 11-4
The following income statement was drawn from the records of Joel Company, a merchandising firm:
JOEL COMPANY
Income Statement
Sales revenue (2,000 units x $125)
Cost of goods sold (2,000 units × $65)
Gross margin
Sales commissions (10% of sales)
Administrative salaries expense
For the Year Ended December 31, Year 1
Advertising expense
Depreciation expense
Shipping and handling expenses (2,000 units × $1.00)
Net income
Required
Req A
a. Reconstruct the income statement using the contribution margin format.
b. Calculate the magnitude of operating leverage. Round the answer to two decimal places.
c. Use the measure of operating leverage to determine the amount of net income Joel will earn if sales increase by 10 percent.
Complete this question by entering your answers in the tabs below.
Req B and C
Reconstruct the income statement using the contribution margin format.
JOEL COMPANY
Income Statement
For the Year Ended December 31, Year 1
$
$
< Req A
$250,000
(130,000)
0
120,000
(25,000)
(30,000)
(20,000)
(24,000)
(2,000)
$19,000
0
Req B and C >
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Transcribed Image Text:Exercise 11-15A (Static) Using contribution margin format income statement to measure the magnitude of operating leverage LO 11-3, 11-4 The following income statement was drawn from the records of Joel Company, a merchandising firm: JOEL COMPANY Income Statement Sales revenue (2,000 units x $125) Cost of goods sold (2,000 units × $65) Gross margin Sales commissions (10% of sales) Administrative salaries expense For the Year Ended December 31, Year 1 Advertising expense Depreciation expense Shipping and handling expenses (2,000 units × $1.00) Net income Required Req A a. Reconstruct the income statement using the contribution margin format. b. Calculate the magnitude of operating leverage. Round the answer to two decimal places. c. Use the measure of operating leverage to determine the amount of net income Joel will earn if sales increase by 10 percent. Complete this question by entering your answers in the tabs below. Req B and C Reconstruct the income statement using the contribution margin format. JOEL COMPANY Income Statement For the Year Ended December 31, Year 1 $ $ < Req A $250,000 (130,000) 0 120,000 (25,000) (30,000) (20,000) (24,000) (2,000) $19,000 0 Req B and C >
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