Connect XG The income st. 4.2-6,3-1 6 Saved The following income statement was d

Question

Connect XG The income st. 4.2-6,3-1 6 Saved The following income statement was drawn from the records of Joel Company, a merchandising JOEL COMPANY Income Statement For the Year Ended December 31, 2018 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 Advertising expense Depreciation expense Shipping and handling expenses (2,000 units x S.)12 000) Net income $ 250,000 130,00e) 120,000 (25,e03) (30,000) (20,000) (24,000 Required a. Reconstruct the income statement using the contribution margin format b. Calculate the magnitude of operating leverage c. Use the messure of operating leverage to determine the emount of net income amount of net income Joel wat earn it saies increase by 10pee is question by entering your answers in the tabs below. Complete thi Net F9 F011 12 meent F8

Explanation / Answer

a.

b. Operating Leverage = Contribution Margin / Net Income

= 93000/19000 = 4.9

c. % increase in net income due to increase in sales = 10% * 4.9 = 49%

Increased net income = 19000 * 149% = 28,310

Contribution Margin Income Statement Sales 250000 Less: Variable Costs Cost of Goods Sold 130000 Sales Commission 25000 Shipping expenses 2000 157000 Contribution Margin 93000 Less: Fixed Costs Administrative salaries expenses 30000 Advertising expense 20000 Depreciation expense 24000 74000 Net Income 19000

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