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    Argosy University/ Phoniex University/
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Category > Accounting Posted 29 Jul 2017 My Price 11.00

Ulrich Company

 

Exercise 11-13     Using a contribution margin format income statement to measure the magnitude of operating leverage

The following income statement was drawn from the records of Ulrich Company, a merchandis- ing firm.

 

 

 

 

 

 

Sales revenue (4,000 units 3 $150)

$600,000

Cost of goods sold (4,000 units 3 $80)

 (320,000)

Gross margin

280,000

Sales commissions (10% of sales)

(60,000)

Administrative salaries expense

(90,000)

Advertising expense

(40,000)

Depreciation expense

(50,000)

Shipping and handling expenses (4,000 units 3 $1)

     (4,000)

Net income

 $ 36,000

 

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 Ulrich will earn if sales increase by 10 percent.

Answers

Maurice Tutor
(5)
Status NEW Posted 29 Jul 2017 11:07 AM My Price 11.00

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