Question
Superior Door Company sells prehung doors to home builders. The doors are sold for $64 each. Variable costs are $44 per door, and fixed costs
Superior Door Company sells prehung doors to home builders. The doors are sold for $64 each. Variable costs are $44 per door, and fixed costs total $957,000 per year. The company is currently selling 52,200 doors per year. |
Required: |
1a. | Prepare a contribution format income statement for the company at the present level of sales. (Input all amounts as positive values except losses which should be indicated by a minus sign.) |
Contribution Income Statement | |
Total | |
$ | |
$ | |
| |
1b. | Compute the degree of operating leverage. |
Degree of operating leverage |
2. | Management is confident that the company can sell 67,338 doors next year (an increase of 15,138, or 29%, over current sales). |
a. | Compute the expected percentage increase in net operating income for next year. |
Net operating income increases by | % |
b. | Compute the expected net operating income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.) |
Total expected net operating income | $ |
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