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 26,000 units follow: Process 1 Process 2 Sales $7,072,000 $7,072,000 Variable expenses 2,834,000 3,952,000 Contribution margin $4,238,000 $3,120,000 Less total fixed expenses 3,621,095 1,402,700 Operating income $616,905 $1,717,300 Unit selling price $272 $272 $109 $152 $163 $120 Unit variable cost Unit contribution margin 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 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 S Process 2 $