11.

Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:

		Amount	Percent of Sales
Sales	$	141,000	100%
Variable expenses		56,400	40%
Contribution margin		84,600	60%
Fixed expenses		16,000
Net operating income	$	68,600

Required:

1. Compute the companys degree of operating leverage. (Round your answer to 2 decimal places.)

Degree of operating leverage

__________

2. Using the degree of operating leverage, estimate the impact on net operating income of a 15% increase in sales. (Round your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).)

Net operating income increases by _____%

3. Construct a new contribution format income statement for the company assuming a 15% increase in sales.

Engberg CompanyC

ontribution Income Statement

Total

Sales $162,150

Variable expenses 64,860

Contribution margin 97,290

Fixed expenses 16,000

Net operating income$81,290