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

	Amount	Percent of Sales
Sales	$ 90,000	100%
Variable expenses	36,000	40%
Contribution margin	54,000	60%
Fixed expenses	42,300
Net operating income	$ 11,700

Required:

1. What is the companys degree of operating leverage?

2. Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in unit sales.

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