Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales 100% 40% 60% Sales Variable expenses Contribution margin Amount $ 134,000 53,600 80,400 Fixed expenses 18,000 Net operating income $ 62,400 Required: 1. What is the company's degree of operating leverage? (Round two decimal places.) 2. Using the degree of operating leverage, estimate the percentage increase in net operating income if there is a 20% increase in unit sales. (Enter the percentage as a whole number with two decimal places, i.e., 40.25.) 3. Construct a new contribution format income statement for the company assuming a 20% increase in unit sales.
Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales 100% 40% 60% Sales Variable expenses Contribution margin Amount $ 134,000 53,600 80,400 Fixed expenses 18,000 Net operating income $ 62,400 Required: 1. What is the company's degree of operating leverage? (Round two decimal places.) 2. Using the degree of operating leverage, estimate the percentage increase in net operating income if there is a 20% increase in unit sales. (Enter the percentage as a whole number with two decimal places, i.e., 40.25.) 3. Construct a new contribution format income statement for the company assuming a 20% increase in unit sales.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
Amount
$ 134,000
53,600
80,400
18,000
$62,400
Percent of
Sales
100%
40%
60%
Required:
1. What is the company's degree of operating leverage? (Round to two decimal places.)
2. Using the degree of operating leverage, estimate the percentage increase in net operating income if there is a 20% increase in unit
sales. (Enter the percentage as a whole number with two decimal places, i.e., 40.25.)
3. Construct a new contribution format income statement for the company assuming a 20% increase in unit sales.
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