Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 84,000 100% Variable expenses 33,600 40% Contribution margin 50,400 60% Fixed expenses 40,320 Net operating income $ 10,080 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 an 8% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming an 8% increase in unit sales.
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 84,000 100% Variable expenses 33,600 40% Contribution margin 50,400 60% Fixed expenses 40,320 Net operating income $ 10,080 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 an 8% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming an 8% increase in unit sales.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
| Amount | Percent of Sales | |
|---|---|---|
| Sales | $ 84,000 | 100% |
| Variable expenses | 33,600 | 40% |
| Contribution margin | 50,400 | 60% |
| Fixed expenses | 40,320 | |
| Net operating income | $ 10,080 |
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 an 8% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming an 8% increase in unit sales.
Required 1
| Degree of operating leverage |
Required 2 & 3:see doc attached
Transcribed Image Text: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 8% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming a 8% increase in unit sales.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Using the degree of operating leverage, estimate the impact on net operating income of a 8% increase in unit sales. (Round
your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be
entered as 12.34).)
Net operating income
by
< Required 1
%
Required 3 >
Transcribed Image Text:new co
Complete this question by entering your answers in the tabs below.
ition formal income statement for the mpany
Required 1 Required 2 Required 3
Sales
Variable expenses
Contribution margin
Construct a new contribution format income statement for the company assuming a 8% increase in unit sales.
Fixed expenses
Net operating income
Engberg Company
Contribution Income Statement
Amount
$
0
0
Percent of Sales
%
%
0%
< Required 2
ng a 8% increase in unit sales.
Required 3 >
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