Oslo Company prepared the following contribution format income statement based o

Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

  Sales $ 22,400    
  Variable expenses 12,800    

  Contribution margin 9,600    
  Fixed expenses 7,968    

  Net operating income $ 1,632    

What is the margin of safety in dollars?

What is the margin of safety percentage?

What is the degree of operating leverage?

Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 3% increase in sales?

Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $7,968 and the total fixed expenses are $12,800. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?

Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $7,968 and the total fixed expenses are $12,800. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 3% increase in sales?

Explanation / Answer

a sales 22400 b Less:variable cost 12800 c contribution 9600 d Less:fixed cost 7968 e net operating income 1632 e/a MOS in dollars 3808 MOS 17% c/e DOL 5.882353 estimated increase in income 17.65% revised DOL a sales 22400 b Less:variable cost 7968 c contribution 14432 d Less:fixed cost 12800 e net operating income 1632 c/e revised DOL 8.843137 revised increase in income 26.53%

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