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

Amount Percent of Sales

Sales $

Variable expenses

Contribution margin

Fixed expenses

Net operating income $

Required:

What is the companys degree of operating leverage?

Using the degree of operating leverage, estimate the impact on net operating income of a increase in unit sales.

Construct a new contribution format income statement for the company assuming a increase in unit sales.