1a) Bois Corporation has provided its contribution format income statement for January.

Sales	$	426,400
Variable expenses		260,000
Contribution margin		166,400
Fixed expenses		120,900
Net operating income	$	45,500

The degree of operating leverage is closest to:

Multiple Choice

a) 9.37

b) 0.27

c) 3.66

d) 0.11

1b) Thornbrough Corporation produces and sells a single product with the following characteristics:

	Per Unit			Percent of Sales
Selling price	$	220			100	%
Variable expenses		44			20	%
Contribution margin	$	176			80	%

The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month.

The marketing manager believes that a $28,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Multiple Choice

a) decrease of $5,440

b) increase of $5,440

c) decrease of $28,000

d) increase of $33,440