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 38,000 units follow: Process 1 Process 2 $10,336,000 $10,336,000 3,572,000 5,092,000 $6,764,000 $5,244,000 Sales Variable expenses Contribution margin Less total fixed expenses Operating income Unit selling price Unit variable cost Unit contribution margin 1,418,510 3,536,855 $3,227,145 $3,825,490 S272 594 $272 $134 5178 $138 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 96 Process 2 9 % 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