Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales 100% 40% 60% Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 94,000 37,600 56,400 45,120 $ 11,280 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 7% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales

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:
Percent of
Sales
100%
40%
60%
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
Amount
$ 94,000
37,600
56,400
45,120
$ 11,280
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 7% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming a 7% 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: Percent of Sales 100% 40% 60% Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 94,000 37,600 56,400 45,120 $ 11,280 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 7% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.
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