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

	Amount	Percent of Sales
Sales	$ 126,000	100%
Variable expenses	50,400	40%
Contribution margin	75,600	60%
Fixed expenses	24,000
Net operating income	$ 51,600

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 18% increase in unit sales.

3. Construct a new contribution format income statement for the company assuming a 18% increase in unit sales.

Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:

	Claimjumper	Makeover	Total
Sales	$ 104,000	$ 52,000	$ 156,000
Variable expenses	25,960	5,240	31,200
Contribution margin	$ 78,040	$ 46,760	124,800
Fixed expenses			88,560
Net operating income			$ 36,240

Required:

1. What is the overall contribution margin (CM) ratio for the company?

2. What is the company's overall break-even point in dollar sales?

3. Prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products.