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Europa Publications, Inc. specializes in reference books thatkeep abreast of the rapidly changing political and economic issuesin Europe. The results of the company’s operations during the prioryear are given in the following table. All units produced duringthe year were sold. (Ignore income taxes.)

Sales revenue	$	1,200,000
Manufacturing costs:
Fixed		283,000
Variable		616,000
Selling costs:
Fixed		24,000
Variable		54,000
Administrative costs:
Fixed		64,000
Variable		19,000

Required:

1-a. Prepare a traditional income statement forthe company.

1-b. Prepare a contribution income statementfor the company.

2. What is the firm’s operating leverage forthe sales volume generated during the prior year?

3. Suppose sales revenue increases by 12percent. What will be the percentage increase in net income?

4. Which income statement would an operatingmanager use to answer requirement (3)?

Req. 1A

	EUROPA PUBLICATIONS, INC. Income Statement For the Year Ended December 31, 20XX $0 Operating expenses: 0 $0

Req. 1B

	EUROPA PUBLICATIONS, INC. Income Statement For the Year Ended December 31, 20XX Variable expenses: 0 $0 Fixed expenses: 0 $0

Req. 2

What is the firm’s operating leverage for the sales volumegenerated during the prior year? (Round your answer to 2 decimalplaces.)

	Operating leverage

Req. 3

Suppose sales revenue increases by 12 percent. What will be thepercentage increase in net income? (Do not round intermediatecalculations. Round your answer to 1 decimal place.)

	Percentage increase in net income %

Req. 4

Which income statement would an operating manager use to answerrequirement (3)?

	Contribution income statement Traditional income statement