Following is the income statement for Marrow Mufflers for the month of June 2018: MARROW MUFFLERS Contribution

Question:

Following is the income statement for Marrow Mufflers for the month of June 2018:
MARROW MUFFLERS
Income Statement
Month Ended June 30, 2018
Net Sales Revenue (140 units × $250) .............................. $ 35,000
Variable Costs (140 units × $50) ........................................ 7,000
...................................................... 28,000
Operating Income ...................................................... $ 16,500
Requirements
1. Calculate the degree of operating leverage. (Round to four decimal places.)
2. Use the degree of operating leverage calculated in Requirement 1 to estimate the change in operating income if total sales increase by 40% (assuming no change in sales price per unit). (Round interim calculations to four decimal places and final answer to the nearest dollar.)
3. Verify your answer in Requirement 2 by preparing a income statement with the total sales increase of 40%?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...