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. 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.