Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales Sales Variable expenses Fixed expenses $ 96,000 100% 38,400 40% Contribution margin 57,600 60% 44,160 Net operating income $ 13,440 Assessment Tool iFrame Required: 1. 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 7% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.
Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales Sales Variable expenses Fixed expenses $ 96,000 100% 38,400 40% Contribution margin 57,600 60% 44,160 Net operating income $ 13,440 Assessment Tool iFrame Required: 1. 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 7% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 29BEB: Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in...
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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:
Percent of
Amount
Sales
Sales
Variable expenses
$ 96,000
100%
38,400
40%
Contribution margin
57,600
60%
Fixed expenses
44,160
Net operating income. $ 13,440
Required:
Assessment Tool iFrame
1. 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 7% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.
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