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

		Amount	Percent of Sales
Sales	$	80,000	100%
Variable expenses		32,000	40%
Contribution margin		48,000	60%
Fixed expenses		38,000
Net operating income	$	10,000

Required:

1. Compute the companys degree of operating leverage. (Round your answer to 1 decimal place.)

2. Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. (Do not round intermediate calculations.)

3. Construct a new contribution format income statement for the company assuming a 5% increase in sales.