Degree of Operating Leverage, Percent Change in Profit Ringsmith Company is considering two different processes to make its product--process 1 and process 2. Process 1 requires Ringsmith to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but fixed factory overhead is considerably lower. Relevant data for a sales level of 30,000 units follow: Sales Variable expenses Contribution margin Less total fixed expenses Operating income Unit selling price Unit variable cost Unit contribution margin Process 1 $7,560,000 2,910,000 $4,650,000 3,789,575 $860,425 Process 2 $7,560,000 4,500,000 $3,060,000 1,371,080 $1,688,920 $ 252 $150 $102 $252 $97 $155 Required: 1. Compute the degree of operating leverage for each process. Round your answers to one decimal place. Use the rounded answers in subsequent calculations. Process 1 Process 2 Process 2 2. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process? Process 1 % Process 2 % What will be the increase in operating income for each system? Round your answers to the nearest dollar. Process 1 Process 2 What will be the total operating income for each process? Round your intermediate calculations and final answers to the nearest dollar. Use the rounded answers in subsequent calculations, Process 1 Process 2 3. What if unit sales are 10 percent lower than budgeted? By what percentage will operating income decrease for each process? % Process 1 % Process 2 3. What if unit sales are 10 percent lower than budgeted? By what percentage will operating income decrease for each process? Process 1 % Process 2 % What will be the total operating income for each process? Round your answers to the nearest dollar. Process 1 Process 2