What is the actual net operating income on these general accounting question? The information for Primrose Corporation is given below.Degree of operating leverage 3Break-even revenueVariable Expense220,00045% of SalesWhat is the actual net operating income?A. $ 60,500B. $ 66,000C. S 181,500D. $ 198,000E. None of the above

Step 1: Define Degree of Operating LeverageThe degree of operating leverage represents the…

Answered: The information for Primrose…

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 29E

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INCOME STATEMENT Hermann Industries is forecasting the following income statement:Sales $8,000,000Operating costs excluding depr. & amort. 4,400,000EBITDA $3,600,000Depreciation & amortization 800,000EBIT $2,800,000Interest 600,000EBT $2,200,000Taxes (40%) 880,000Net income $1,320,000The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assumethat operating costs (excluding depreciation and amortization) are 55% of sales and thatdepreciation and amortization and interest expenses will increase by 10%. The tax rate, whichis 40%, will remain the same. What level of sales would generate $2,500,000 in net income?

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