Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $138,000 100% Variable expenses 55,200 40% Contribution margin 82,800 60% Fixed expenses 18,000 Net operating income $64,800 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 17% increase in sales.

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 22MC: If a firm has a contribution margin of $59,690 and a net income of $12,700 for the current month,...
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Engberg Company installs lawn sod in home yards. The company's most recent
monthly contribution format income statement follows:
Amount Percent of Sales
Sales
$138,000 100%
Variable expenses
55,200 40%
Contribution margin 82,800
60%
Fixed expenses
18,000
Net operating income $64,800
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 17% increase in sales.
Transcribed Image Text:Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $138,000 100% Variable expenses 55,200 40% Contribution margin 82,800 60% Fixed expenses 18,000 Net operating income $64,800 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 17% increase in sales.
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