Suppose Katie sells 1800 posters. Use the following financial data ($32 sales price, $27 variable cost, $2800 fixed expenses) to compute her operating leverage factor. If sales volume increases 12%, by what percent will Katie's operating income change? Prove your answer.

First, identify the formula, then compute the operating leverage factor. (Round your answer to two decimal places.)

Contribution margin

/

Operating income

=

Operating leverage factor

/

=

If sales volume increases 16% by what percent will Katie's operating income change? (Round the percentage change to one decimal place, X.X%)

Operating income will increase by --- %.

Prove your answer. (Round the percentage change to one decimal place, X.X%)

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		%