Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 133,000

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

Amount Percent of Sales
Sales $ 133,000 100 %
Variable expenses 53,200 40 %
Contribution margin 79,800 60 %
Fixed expenses 24,000
Net operating income $ 55,800

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 16% increase in sales.

3. Construct a new contribution format income statement for the company assuming a 16% increase in sales.

Income statement options:

  • Administrative expenses
  • Advertising
  • Beginning merchandise inventory
  • Commissions
  • Cost of goods sold
  • Depreciation
  • Direct labor
  • Direct materials
  • Ending merchandise inventory
  • Fixed expenses
  • Indirect labor
  • Indirect materials
  • Purchases
  • Sales
  • Selling expenses
  • Variable expenses

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting Foundations And Evolutions

Authors: Amie Dragoo, Michael Kinney, Cecily Raiborn

10th Edition

1618533533, 9781618533531

More Books

Students also viewed these Accounting questions

Question

=+a. Does it flow? (Can anyone read it out loud without stumbling?)

Answered: 1 week ago

Question

=+e. Does it use simple language, not technical jargon?

Answered: 1 week ago