Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales $139,000 100% Sales Variable expenses 55,600 40% Contribution margin 83,400 60% Fixed expenses 18,000 Net operating income $65,400 1. Compute the company's degree of operating leverage. 2. Using the degree of operating leverage, estimate the impact on net operating income of a 23% increase in sales.

Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales $139,000 100% Sales Variable expenses 55,600 40% Contribution margin 83,400 60% Fixed expenses 18,000 Net operating income $65,400 1. Compute the company's degree of operating leverage. 2. Using the degree of operating leverage, estimate the impact on net operating income of a 23% increase in sales.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 16E

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