Entergo Company installs home theatre systems. The company€™s most recent monthly contribution format income statement appears below:

Required:
1. Compute the company€™s degree of operating leverage.
2. Using the degree of operating leverage, estimate the impact on operating income of a 10% increase in sales.
3. Verify your estimate from (2) above by constructing a new contribution format income statement for the company, assuming a 10% increase in sales.

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Percentage of Sales Amount $120,000 84,000 36,000 24,000 $ 12,000 Sales.... Variable expenses. Contribution margin... Fixed expenses.. Operating income.. 100% 70% 30%