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Required information Skip to question [ The following information applies to the questions displayed below. ] Angie Silva has recently opened The Sandal Shop in
Required information
Skip to question
The following information applies to the questions displayed below.
Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store:
Sales price per pair of sandals $
Variable expenses per pair of sandals
Contribution margin per pair of sandals $
Fixed expenses per year:
Building rental $
Equipment depreciation
Selling
Administrative
Total fixed expenses $
Refer to the original data. During the first year, the store sold only pairs of sandals and reported the following operating results:
Sales pairs $
Variable expenses
Contribution margin
Fixed expenses
Net operating income $
a What is the stores degree of operating leverage?
b Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase unit sales by next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase unit sales by
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