Based in Italy, Datura, Ltd., is an international importer-exporter of pottery with distribution
centers in the United States, Europe, and Australia. The company was very successful in its
early years, but its profitability has since declined. As a member of a management team
selected to gather information for Datura's next strategic planning meeting, you have been asked
to review its most recent contribution margin income statement for the year ended
December 31, 2016, which appears below:

What is the degree of operating leverage for Datura in 2016? What would happen
if sales saw an increase of 8% in 2017?

Datura, Ltd Contribution Margin Income Statement For the Year Ended December 31, 2016 Sales Revenue 13,500,000 Less: variable costs Purchases Distribution Sales Commission Total variable costs 6,000,000 2,115,000 1,410,000 9,525,000 Contribution Margin 3,975.000 Less Fixed costs Distribution Selling General and administrative Total fixed costs 985,000 1,184,000 871,875 3,040,875 Net operating income 934.125