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

	Amount	Percent of Sales
Sales	$ 123,000	100%
Variable expenses	49,200	40
Contribution margin	73,800	60%
Fixed expenses	23,000
Net operating income	$ 50,800

Required:

1. What is the companys degree of operating leverage?

• Required 3

What is the companys degree of operating leverage? (Round your answer to 2 decimal places.)

	Degree of operating leverage

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

Using the degree of operating leverage, estimate the impact on net operating income of a 22% increase in unit sales. (Round your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).)

Net operating income

increases

by

%

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

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

Engberg Company
Contribution Income Statement
	Amount	Percent of Sales
Sales			%
Variable expenses			%
Contribution margin	0	0	%
Fixed expenses
Net operating income	$0