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Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 131,000

Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 131,000 100 % Variable expenses 52,400 40 % Contribution margin 78,600 60 % Fixed expenses 24,000 Net operating income $ 54,600 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 13% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 13% increase in sales.

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