Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 86,000 100% Variable expenses 34,400 40% Contribution margin 51,600 60% Fixed expenses 38,700 Net operating income $ 12,900 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.
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 86,000 100% Variable expenses 34,400 40% Contribution margin 51,600 60% Fixed expenses 38,700 Net operating income $ 12,900 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $ 86,000 100%
Variable expenses 34,400 40%
Contribution margin 51,600 60%
Fixed expenses 38,700
Net operating income $ 12,900
- 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.
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