Engberg Company installs lawn sod in nome yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 88,000 35,200 52,800 42,240 $ 10,560 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 6% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.
Engberg Company installs lawn sod in nome yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 88,000 35,200 52,800 42,240 $ 10,560 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 6% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5PB: Wellington, Inc., reports the following contribution margin income statement for the month of May....
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