4.) Yiruma Company sells musical instruments. The companys most recent monthly contribution format income statement follows: Amount Percent of sales Sales P 80,000 100% Variable expenses 32,000 40% Contribution margin 48,000 60% Fixed expenses 38,000 Net operating income P 10,000 Required: a.) Compute companys operating leverage. b.) Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. c.) Verify your estimate from a part (2) above by constructing a new contribution format income statement for the company assuming a 5% increase in sales.

4.) Yiruma Company sells musical instruments. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount P 80,000 32,000 48,000 38,000 P 10,000 Percent of sales 100% 40% 60% Required: a.) Compute company's operating leverage. b.) Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. c.) Verify your estimate from a part (2) above by constructing a new contribution format income statement for the company assuming a 5% increase in sales