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 35,000 units follow: Process 1 Process 2 Sales $8,820,000 Variable expenses 3,045,000 Contribution margin $5,775,000 3,631,625 $8,820,000 4,550,000 $4,270,000 1,376,350 $2,893,650 Less total fixed expenses Operating income $2,143,375 Unit selling price $252 $252 Unit variable cost $87 $130 Unit contribution margin $165 $122 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 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 % 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