Suburban Landscape provides landscaping design and installation for residential and commercial properties. The companys recent annual contribution format income statement follows:

	Amount			Percent of Sales
Sales	$	123,000		100	%
Variable expenses		49,200		40	%
Contribution margin		73,800		60	%
Fixed expenses		24,000
Net operating income	$	49,800

Required:

1. What is the companys degree of operating leverage?

2. Using the degree of operating leverage, estimate the impact on net operating income of a 18% increase in sales.

3. Construct a new contribution format income statement for the company assuming a 18% increase in sales.