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Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO.Contribution Margin Income StatementFor Year Ended December 31, 2017Sales (9,600 units at $225 each)$2,160,000Variable

Hudson Co. reports the contribution margin income statement for 2017.

HUDSON CO.Contribution Margin Income StatementFor Year Ended December 31, 2017Sales (9,600 units at $225 each)$2,160,000Variable costs (9,600 units at $180 each)1,728,000Contribution margin$432,000Fixed costs324,000Pretax income$108,000

1.Compute the company's degree of operating leverage for 2017.

2.If sales decrease by 5% in 2018, what will be the company's pretax income?

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