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Required information [The following information applies to the questions displayed below.) Angle Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that
Required information [The following information applies to the questions displayed below.) Angle 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 $ 32 Variable expenses per pair of sandals 16 Contribution margin per pair of sandals $ 16 Fixed expenses per year: Building rental $ 9,600 Equipment depreciation 12,000 Selling 9,600 Administrative 16,800 Total fixed expenses $ 48,000 5. Refer to the original data. During the first year, the store sold only 3,500 pairs of sandals and reported the following operating results: Sales (3,500 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 112,000 56,000 56,080 48,000 $ 8,000 a. What is the store's degree of operating leverage? b. Angle is confident that with a more intense sales effort and with a more creative advertising program she can increase unit sales by 50% 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 50%? a. Degree of operating leverage b. Expected percentage increase in net operating income %
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