ChangingTimes sells 185,000 bottles of TempeTingler nail polish each year. The product, which is very popular with teens, sells for $13 per bottle, and variable cost per unit is $5.50. Total annual fixed costs are $1,260,000.

1. What is the degree of operating leverage?
2. If the company can increase unit sales by 20%, what percentage increase will it experience in income? Prove your answer using an income statement.