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

	Amount	Percent of Sales
Sales	$ 92,000	100%
Variable expenses	36,800	40%
Contribution margin	55,200	60%
Fixed expenses	42,320
Net operating income	$ 12,880

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 6% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.

What is the companys degree of operating leverage?

Note: Round your answer to 2 decimal places.

Degree of operating leverage

Using the degree of operating leverage, estimate the impact on net operating income of a 6% increase in unit sales.

Note: Round your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

Net operating income

by

%

• Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.

Engberg Company
Contribution Income Statement
	Amount	Percent of Sales
			%
			%
			%