Question
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
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):
Sales $ 22,400 Variable expenses 12,800 Contribution margin 9,600 Fixed expenses 7,968 Net operating income $ 1,632
What is the margin of safety in dollars? What is the margin of safety percentage? What is the degree of operating leverage? Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 3% increase in sales? Assume that the amounts of the companys total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $7,968 and the total fixed expenses are $12,800. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? 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 $7,968 and the total fixed expenses are $12,800. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 3% increase in sales?
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