Engberg Company installs lawn sod in home yards. The company$$s most recent monthly contribution format income statement follows:

Amount Percent of Sales

Sales $ $86,000100\%$

Variable expenses $34,40040\%$

Contribution margin $51,60060\%$

Fixed expenses $40,420$

Net operating income $ $11,180$

Required:

$1.$ What is the company$$s degree of operating leverage?

$2.$ Using the degree of operating leverage, estimate the impact on net operating income of a $7\%$ increase in unit sales.

$3.$ Construct a new contribution format income statement for the company assuming a $7\%$ increase in unit sales.