Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store: sales price per pair of sandals Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: 40 16 24 Building rental Equipment depreciation Selling Administrative 15,000 7,000 20,000 18,000 $60,000 Total fixed expenses Problem 5-30 Part 3 3 Angie has decided that she must earn a profit of $18,000 the first year to justify her time and effort. How many pairs of sandals must be sold to attain this target profit? sales to altain target profitpais 5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: Sales (3,000 pairs) $120,000 Variable expenses Contribution margin 72,000 Fixed expenses 60,000 Net operating income 48,000 S 12,000 a. What is the store's degree of operating leverage? b. Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 50% next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase sales by 50%? a. Degree of operating leverage b. Expected percentage increase in net operating income