Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 88,000 100% Variable expenses 35,200 40% Contribution margin 52,800 60% Fixed expenses 40,480 Net operating income $ 12,320

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 7% increase in unit sales.

3. Construct a new contribution format income statement for the company assuming a 7% increase n unit sales