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

AmountPercent of SalesSales$147,000100%Variable expenses58,80040%Contribution margin88,20060%Fixed expenses20,000Net operating income$68,200

Required:

1. What is the company's degree of operating leverage?

2. Using the degree of operating leverage, estimate the impact on net operating income of a 22% increase in sales.

3. Construct a new contribution format income statement for the company assuming a 22% increase in sales.