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

Amount Percent of Sales

Sales 133,000 100%

Variable Expenses 53,200 40 %

Contribution Margin 79,800 60%

Fixed Expenses 19,000

Net Operating income 60,800

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 25% increase in sales

3. Construct a new contribution format income statement for the company assuming a 25% increase in sales.