ezto.mheducation.com/hm.tpx 2.00 points Eneliko Company installs home theater sy

Question

ezto.mheducation.com/hm.tpx 2.00 points Eneliko Company installs home theater systems. The company's most recent monthly contribution format income statement appears below Amount $147000 58,800 Percent of Sales 100% 4% Sales Variable expenses Contribution margin Fixed expenses 60% 88200 22.000 Net operating income$ 66.200 Required 1. Compute the company's degree of operating leverage (Round your answer to 2 decimal places.) Degree of operating leverage1.33 2 Uinthe degree of operating 2. Using the degree of operating leverage, estimate the impact on net operating income of a 26% increase in sales. (Input the amount as a positive value. Round your intermediate calculations and final answers to 2 decimal places.) Net operating income increasesby 34.58% 3. Construct a new contribution format income statement for the company assuming a 26% increase in sales (Input all amounts as positive values except losses which should be indicated by a minus sign.) Contribution Income Statement Sales Total Contribution margin Foxed expenses Net operating income (loss) Hints References eBook & Resources

Explanation / Answer

1. (3) contibution income statement

   sale[147000 + (26% * 147000)] 185220

less: variable expense[58800 +(26%*58800)] 74088

contribution 111132

less: Fixed cost 22000

Net operating profit   $89132

Note:- Variable expense is dependent on sale . If Sales increase , variable expense will increase.

Fixed cost remains fixed for any quantity of sales, it is not affected by increase or decrease of sales

2. (3) contribution income statement at break even point

Predator Runway total

sales 78200 39100 117300

less:variable cost 19506 3954 23460

contribution 58694 35146 93840

less: fixed cost 93840

Net operating profit $0

Note:- sales of predator and runway is calculated by their sales ratio:

  Total Break even sales = $117300

predator sale = 117300 * 106000 / (106000 + 53000)

   = 117300 * 106000 / 159000

   = $78200

runway sales = 117300 * 53000 / 159000

   = $39100

Variable cost:

Predator = 26440 * (78200 / 106000) = $19506

Runway = 5360 * (39100 / 53000) = $3954

3. (4)   Margin of safety in dollar = actual sales - break even sale

   =$624000 - $516000

   =$108000

     

   percentage of margin of safety = (624000 - 516000) / 624000

   = 108000 / 624000

   = 17.31%

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