Suppose Kari sells 2,600 posters. Use the following financial data ($38 salesprice, $32 variablecost, $3,180 fixedexpenses) to compute her operating leverage factor. If sales volume increases 10%, by what percent will Kari's operating incomechange? Prove your answer.

First, identify theformula, then compute the operating leverage factor.

/

=

Operating leverage factor

/

=

If sales volume increases 10%, by what percent will Kari's operating incomechange?

Operating income will increase by

nothing

%.

Prove your answer.

Original volume (posters)

Add: Increase in volume

New volume (posters)

Multiplied by: Unit contribution margin

New total contribution margin

Less: Fixed expenses

New operating income

Less: Operating income before change in volume

Increase in operating income

Percentage change

%