Part A – For Problems 1-10 Consider the Baseline simplified income statement displayed below, where it is assumed that purchases and other expenses account for, respectively, 50% and 40% of sales: Baseline Sales $1,000 Cost of goods sold Purchases (50% of sales) $500 Other expenses (40% of sales) $400 $ 900 Profit before taxes $ 100 (10 Points) For problems #1-5, prepare a modified income statement to show that the sales must be increased by 10% in order to increase the before-taxes profit by 10%. Increase Sales by 10% Sales $ #1 Cost of goods sold Purchases (50% of sales) $ #2 Other expenses (40% of sales) $ #3 $ #4 Profit before taxes $ #5 (10 Points) For Problems 6-10, prepare another modified income statement to show that, through the profit leverage, a 2% reduction in the purchasing costs of $500 will have the same impact on the before-taxes profit as the aforementioned 10% increase in sales. Reduce Purchases by 2% Sales $ #6 Cost of goods sold Purchases (48% of sales) $ #7 Other expenses (40% of sales) $ #8 $ #9 Profit before taxes $ #10