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 34,000 units follow: Process 1 Process 2 Sales $9,248,000 2,890,000 Variable expenses $9,248,000 4,760,000 $4,488,000 1,513,370 Contribution margin $6,358,000 3,631,625 Less total fixed expenses Operating income $2,726,375 $2,974,630 Unit selling price $272 $272 Unit variable cost $85 $140 Unit contribution margin $187 $132 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 70 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