Greens cape Services specializes in garden landscaping. Its most recent monthly contribution margin income statement shows: ⚫ Sales = $180,000 . • Variable expenses = $72,000 Contribution margin = $108,000 Fixed expenses = $40,000 Net operating income = $68,000 Required: Using the degree of operating leverage, estimate the percentage increase in net operating income if sales increase by 12%.

Greens cape Services specializes in garden landscaping. Its most recent monthly contribution margin income statement shows: ⚫ Sales = $180,000 . • Variable expenses = $72,000 Contribution margin = $108,000 Fixed expenses = $40,000 Net operating income = $68,000 Required: Using the degree of operating leverage, estimate the percentage increase in net operating income if sales increase by 12%.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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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.