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 $29,000$ units follow:

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 $2$:$\%$

$3)$ What will be the increase in operating income for each system? Round your answers to the nearest dollar.

Process $1$:

Process $2$:

$4)$ 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 $2$: $

$5)$ What if unit sales are $10$ percent lower than budgeted? By what percentage will operating income decrease for each process?

Process $1$:$\%$

Process $2$:$\%$

$6)$ 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 $2$: $