Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales Sales Variable expenses Amount $ 134, 000 53, 600 100% 40% Contribution margin 80, 400 60% Fixed expenses 15,000 Net operating income $ 65, 400 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 12% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 12% increase in sales.
Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales Sales Variable expenses Amount $ 134, 000 53, 600 100% 40% Contribution margin 80, 400 60% Fixed expenses 15,000 Net operating income $ 65, 400 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 12% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 12% increase in sales.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 9PB: Fire Company is a service firm with current service revenue of $900,000 and a 40% contribution...
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