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

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
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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