FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
Amount
$ 134,000
53,600
80,400
18,000
$62,400
Percent of
Sales
100%
40%
60%
Required:
1. What is the company's degree of operating leverage? (Round to two decimal places.)
2. Using the degree of operating leverage, estimate the percentage increase in net operating income if there is a 20% increase in unit
sales. (Enter the percentage as a whole number with two decimal places, i.e., 40.25.)
3. Construct a new contribution format income statement for the company assuming a 20% increase in unit sales.
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Transcribed Image Text:Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 134,000 53,600 80,400 18,000 $62,400 Percent of Sales 100% 40% 60% Required: 1. What is the company's degree of operating leverage? (Round to two decimal places.) 2. Using the degree of operating leverage, estimate the percentage increase in net operating income if there is a 20% increase in unit sales. (Enter the percentage as a whole number with two decimal places, i.e., 40.25.) 3. Construct a new contribution format income statement for the company assuming a 20% increase in unit sales.
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