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

	Amount	Percent of Sales
Sales	$ 149,000	100%
Variable expenses	59,600	40
Contribution margin	89,400	60%
Fixed expenses	18,000
Net operating income	$ 71,400

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 26% increase in unit sales.

3. Construct a new contribution format income statement for the company assuming a 26% increase in unit sales.