Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp. Floor lamps sell for $30, and desk lamps sell for $20. The projected income statement for the coming year follows:

Sales $600,000

Total variable cost $400,000

Contribution margin $200,000

Total fixed cost $150,000

Operating income $50,000

The owner of Carlyle estimates that 60% of the sales revenues will be produced by floor lamps and the remaining 40% by desk lamps. Floor lamps are also responsible for 60% of the variable cost. Of the fixed cost, one third is common to both products, and one half is directly traceable to the floor lamp product line.

1: Compute the sales revenue that must be earned for Carlyle to break even.

2: Compute the number of floor lamps and desk lamps, that must be sold for Carlyle to break even.

3: Compute the degree of operating leverage for Carlyle. Now assume that the actual revenues will be 40% higher than the projected revenues. By what percentage will profits increase with this change in sales volume?