Engberg Company instals lawn sod in home yards. The company\' s most recent mont
ID: 2333095 • Letter: E
Question
Engberg Company instals lawn sod in home yards. The company' s most recent monthly contribution format income statement follows Percent Sales Variable expensos $148,000 100% 40% 60% Cor ensos $148,000 f Sales Contibution margin88,800 16,000 S 72,800 Flxed expenses Net operating income Required: 1. Compute the company's degree of operating leverage. (Round your answer to 2 decimal places.) 2. Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales . (Round your intermediate ealculations to 2 decimal places. Round calculations to 2 decimal places. Round your percentage answer to 2 decimal places (e 1234 should be entered as 1 3. Construct a new contribution format income statement for the company assuming a 20% increase in sales.Explanation / Answer
1.Degree of operating leverage=Contribution/net operating income
=(88,800/72800)
=1.22(Approx).
2.Degree of operating leverage=Change in operating income/Change in sales
Hence change in operating income=increase in operating income=(1.22*20)
=24.40%(Approx)
3.
Total Sales(148000*1.2) $177600 Variable expenses(59200*1.2) $71040 Contribution margin $106560 Fixed expenses $16000 Net operating income $90560Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.