Ringsmith Company is considering two different processes to make its productprocess 1 and process 2. Process 1 requires Ringsmith to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but fixed factory overhead is considerably lower. Relevant data for a sales level of 30,000 units follow:

Process 1 Process 2Sales $7,500,000 $7,500,000Variable expenses 3,270,000 4,620,000 Contribution margin $4,230,000 $2,880,000Less total fixed expenses 3,652,685 1,397,430 Operating income $577,315 $1,482,570Unit selling price $250 $250Unit variable cost $109 $154Unit contribution margin $141 $96

Required:

1. Compute the degree of operating leverage for each process. Round your answers to one decimal place. Use the rounded answers in subsequent calculations.

Process 1fill in the blank 1Process 2fill in the blank 2

2. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process?

Process 1fill in the blank 3%Process 2fill in the blank 4%

What will be the increase in operating income for each system? Round your answers to the nearest dollar.

Process 1$fill in the blank 5Process 2$fill in the blank 6

What will be the total operating income for each process? Round your intermediate calculations and final answers to the nearest dollar. Use the rounded answers in subsequent calculations.

Process 1$fill in the blank 7Process 2$fill in the blank 8

3. What if unit sales are 10 percent lower than budgeted? By what percentage will operating income decrease for each process?

Process 1fill in the blank 9%Process 2fill in the blank 10%

What will be the total operating income for each process? Round your intermediate calculations and final answers to the nearest dollar. Use the rounded answers in subsequent calculations.

Process 1$fill in the blank 11Process 2$fill in the blank 12