Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I post this question 5 times. They kept giving me the wrong answer. please I need the correct answer. Oslo Company prepared the following contribution

I post this question 5 times. They kept giving me the wrong answer. please I need the correct answer. image text in transcribed
image text in transcribed
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): 715 Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 85,000 59,500 25,500 20,400 $ 5,100 Foundational 5-15 (Algo) 15. Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $20,400 and the total fixed expenses are $59,500. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in unit sales? (Round your intermediate calculations and final answer to 2 decimal places.) Answer is complete but not entirely correct. Increase in net operating income 83.33 % No SIM 11:36 PM 7 33% increase in net operating income 63.33% working; Degree of operating leverage = contribution / net income. here, contribution = $85,000 sales - $20,400 new variable expenses->$64,600 net income = $64,600 new contribution - $59,500 fixed expense =>$5,100. Degree of operating leverage = $64,600 / 5100 =>12.66667. so if there is 5% increase in sales =>increase in operating income => increase in sales * DOL =>5*12.66667 =>63.33%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Ready Notes For Use With Managerial Accounting

Authors: Ronald W. Hilton

4th Edition

0073656518, 978-0073656519

More Books

Students also viewed these Accounting questions

Question

1.what is the significance of Taxonomy ?

Answered: 1 week ago

Question

What are the advantages and disadvantages of leasing ?

Answered: 1 week ago

Question

Name is needed for identifying organisms ?

Answered: 1 week ago