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

	Amount			Percent of Sales
Sales	$	143,000		100	%
Variable expenses		57,200		40	%
Contribution margin		85,800		60	%
Fixed expenses		18,000
Net operating income	$	67,800

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 19% increase in sales.

3. Construct a new contribution format income statement for the company assuming a 19% increase in sales.