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 $ 98,000 39, 200 58,800 47,040 $ 11,760 Percent of Sales 100% 40 60% Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 7% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.

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 $ 98,000 39, 200 58,800 47,040 $ 11,760 Percent of Sales 100% 40 60% Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 7% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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