Exercise 6-9 Compute and Use the Degree of Operating Leverage (LO6-8] Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 141,000 56,400 84,600 17,000 $ 67,600 Percent of Sales 100% 40% 60% Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 25% increase in sales. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the company's degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage 1.25 Exercise 6-9 Compute and Use the Degree of Operating Leverage (L06-8] Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 141,000 56,400 84,600 17,000 $ 67,600 Percent of Sales 100% 40% 60% Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 25% increase in sales. X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. (Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e 0.1234 should be entered as 12.34).) Net operating income increases by 31.00 % Exercise 6-9 Compute and Use the Degree of Operating Leverage (LO6-8] Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 141,000 56,400 84,600 17,000 $ 67,600 Percent of Sales 100% 40% 60% Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 25% increase in sales. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Construct a new contribution format income statement for the company assuming a 25% increase in sales. Engberg Company Contribution Income Statement Amount Percent of Sales Sales 25 X % $ 176,250 70,500 105,750 17,000 $ 88,750 Variable expenses Contribution margin Fixed expenses Net operating income 40% (15) %
