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 Amount $ 92,000 36,800 55,200 41,400 Percent of Sales 100% 40 60%

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
$
92,000
36,800
55,200
41,400
$
13,800
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 5% increase in unit sales.
3. Construct a new contribution format
income statement for the company
assuming a 5% increase in unit sales.
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 $ 92,000 36,800 55,200 41,400 $ 13,800 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 5% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 5% increase in unit sales.
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