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 $ 86,000 34,400 51,600 39,560 $12,040 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. Required 1 Percent of Sales 100% 40% 60% Complete this question by entering your answers in the tabs below. Required 2 Required 3 What is the company's degree of operating leverage? (Round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING
10th Edition
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
$ 86,000
34,400
51,600
39,560
$ 12,040
Required:
1. What is the company's degree of operating leverage?
Required 1
Percent of
Sales
100%
40%
60%
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.
Complete this question by entering your answers in the tabs below.
Required 2 Required 3
What is the company's degree of operating leverage? (Round your answer to 2 decimal places.)
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 $ 86,000 34,400 51,600 39,560 $ 12,040 Required: 1. What is the company's degree of operating leverage? Required 1 Percent of Sales 100% 40% 60% 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. Complete this question by entering your answers in the tabs below. Required 2 Required 3 What is the company's degree of operating leverage? (Round your answer to 2 decimal places.)
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