Slowhand Corporation has provided its contribution format income statement for April. Sales…………………………………………….. $280,000 Variable Expenses……………………….. $105,000 Contribution Margin……………………. $ 175,000 Fixed Expenses……………………………. $ 125,000 Net Operating Income………………… $ 50,000 Required: Compute the degree of operating leverage to two decimal place. Using the degree of operating leverage, estimate the percentage change to two decimal places in net operating income that should result from a 9% increase in sales.
Slowhand Corporation has provided its contribution format income statement for April. Sales…………………………………………….. $280,000 Variable Expenses……………………….. $105,000 Contribution Margin……………………. $ 175,000 Fixed Expenses……………………………. $ 125,000 Net Operating Income………………… $ 50,000 Required: Compute the degree of operating leverage to two decimal place. Using the degree of operating leverage, estimate the percentage change to two decimal places in net operating income that should result from a 9% increase in sales.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Slowhand Corporation has provided its contribution format income statement for April.
Sales…………………………………………….. $280,000
Variable Expenses……………………….. $105,000
Contribution Margin……………………. $ 175,000
Fixed Expenses……………………………. $ 125,000
Net Operating Income………………… $ 50,000
Required:
- Compute the degree of operating leverage to two decimal place.
- Using the degree of operating leverage, estimate the percentage change to two decimal places in net operating income that should result from a 9% increase in sales.
Expert Solution
Step 1
A cost accounting measure that help in measuring the degree which signifies the increase in operating income because of the increase in the entity's revenues.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education