and Learn eBook Conerstone Exercise 16.7 (Algorithmic) Degree of Operating Leverage, Percent Change in Profit Ringsmith Company is considering two different processes to make its product-process 1 and process 2. Process 1 requires Ringsmith to manufacture subcomponents of the product io-house As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but foxed factory overhead is considerably lower. Relevant data for a sales level of 38,000 units follow Process 1 Process 2 $9,956,000 3,344,000 6,612,000 3,694,805 $2,917,195 $262 $88 $174 9,956,000 5,168,000 $4,788,000 1,360,540 $3,427,460 $262 $136 126 Sales Varoable expenses Contribution margin Less total fixed expenses Operating income Unit selling price Unit variable cost Unit contribution margin Required: 1. Compute the degree of operating leverage for each process. Round your answers to one decimal place. use the rounded answers in subsequent Process 1 Process 2 2. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process? Process 1 Process 2 What will be the increase ln operating income for each system? Round your andwers to the nearest dolar Process 1 Process 2 al answgs to the near