Question
Exercise 6-9 Compute and Use the Degree of Operating Leverage [LO6-8] Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution
Exercise 6-9 Compute and Use the Degree of Operating Leverage [LO6-8]
Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:
| Amount |
| Percent of Sales | ||
Sales | $ | 143,000 |
| 100 | % |
Variable expenses |
| 57,200 |
| 40 | % |
Contribution margin |
| 85,800 |
| 60 | % |
Fixed expenses |
| 18,000 |
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|
Net operating income | $ | 67,800 |
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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 27% increase in sales.
3. Construct a new contribution format income statement for the company assuming a 27% increase in sales.
Complete this question by entering your answers in the tabs below.
- Required 1
- Required 2
- Required 3
What is the companys degree of operating leverage? (Round your answer to 2 decimal places.)
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Using the degree of operating leverage, estimate the impact on net operating income of a 27% 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).)
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Construct a new contribution format income statement for the company assuming a 27% increase in sales.
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