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Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of sales Sales $138,000 100%
Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of sales Sales $138,000 100% Variable expenses 55,200 40% Contribution margin 82,800 60% Fixed expenses 21,000 Net operating income $61,800 Requirement 1: Compute the company's degree of operating leverage. (Round your answer to 2 decimal places.) Degree of operating leverage Requirement 2: Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales. (Round your answer to 2 decimal places, e.g., .1234 as 12.34. Omit the "%" sign in your response.) Estimated percent change in net operating income % Requirement 3: Verify your estimate from requirement (2) by constructing a new contribution format income statement for the company assuming a 20% increase in sales. (Round "percent change" to 2 decimal places, e.g., .1234 as 12.34. Final answer may vary from Requirement 2 due to rounding. Input all amounts as positive values. Omit the "$" and "%" signs in your response.) Amount Sales $ Variable expenses Contribution margin Fixed expenses Net operating income $ Original net operating income $ Percent change in net operating income %
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