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

Sales $ 86,000 100%

Variable expenses 34,400 40%

Contribution margin 51,600 60%

Fixed expenses 38,700

Net operating income $ 12,900

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 8% increase in unit sales.

3. Construct a new contribution format income statement for the company assuming a 8% increase in unit sales.