Net operating income: Net operating income is the revenue derived from the property excluding all the operating expenses. It is a calculation that is used to identify the profitability of income generated from investments. The net operating income does not include capital expenditure. Degree of operating leverage: When a firm has to recover needs to recover the fixed costs irrespective of the sales volume of the firm, operating leverage occurs in the firm. When operating leverage occurs in the firm, the percentage change in revenue is found to be more than the percentage change in sales provided the fixed costs remain the same. To estimate: The percentage increase in net operating income that would result from a 5% increase in unit sales

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Chapter 5, Problem 15F15

To determine

Concept introduction:

Net operating income:

Net operating income is the revenue derived from the property excluding all the operating expenses. It is a calculation that is used to identify the profitability of income generated from investments. The net operating income does not include capital expenditure.

Degree of operating leverage:

When a firm has to recover needs to recover the fixed costs irrespective of the sales volume of the firm, operating leverage occurs in the firm. When operating leverage occurs in the firm, the percentage change in revenue is found to be more than the percentage change in sales provided the fixed costs remain the same.

To estimate: The percentage increase in net operating income that would result from a 5% increase in unit sales

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