Following is the income statement for Marsden Mufflers for the month of June 2016:
MARSDEN MUFFLERS
Contribution Margin Income Statement
Month Ended June 30, 2016
Sales Revenue (280 units × $325) ..........$ 91,000
Variable Cost (280 units × $150) ......... 42,000
Contribution Margin ............... 49,000
Fixed Costs ................. 12,500
Operating income ............... $ 36,500
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 30% (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 Contribution Margin income statement with the total sales increase of 30%.