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Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,500 and the total fixed expenses are $15,200. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percentage increase in net operating income for a 5% increase in sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.) ABC Corporation prepared the following contribution format income statement based on a sales volume of 1,200 units (the relevant range of production is 800 units to 1,500 units): ⚫ Sales: $30,000 Variable expenses: $18,000 • Contribution margin: $12,000 • Fixed expenses: $9,500 Net operating income: $2,500

Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,500 and the total fixed expenses are $15,200. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percentage increase in net operating income for a 5% increase in sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.) ABC Corporation prepared the following contribution format income statement based on a sales volume of 1,200 units (the relevant range of production is 800 units to 1,500 units): ⚫ Sales: $30,000 Variable expenses: $18,000 • Contribution margin: $12,000 • Fixed expenses: $9,500 Net operating income: $2,500

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 25E
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Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,500 and the total fixed expenses are $15,200. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percentage increase in net operating income for a 5% increase in sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.) ABC Corporation prepared the following contribution format income statement based on a sales volume of 1,200 units (the relevant range of production is 800 units to 1,500 units): ⚫ Sales: $30,000 Variable expenses: $18,000 • Contribution margin: $12,000 • Fixed expenses: $9,500 Net operating income: $2,500
Transcribed Image Text:Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,500 and the total fixed expenses are $15,200. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percentage increase in net operating income for a 5% increase in sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.) ABC Corporation prepared the following contribution format income statement based on a sales volume of 1,200 units (the relevant range of production is 800 units to 1,500 units): ⚫ Sales: $30,000 Variable expenses: $18,000 • Contribution margin: $12,000 • Fixed expenses: $9,500 Net operating income: $2,500
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