1. Beyond Grass installs artificial turf in homes or sporting fields. The companys most recent monthly contribution format income statement is as follows:

Amount % Sales

Sales $80,000 100

Variable Costs $32,000 40

Contribution Margin $48,000 60

Fixed Costs $38,000

Net Operating Income $10,000

Required:

1. Compute the companys degree of operating leverage.

2. By what % would net operating income increase if sales increased by 5%?