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 $ 90,000 36,000 54,000 41,400 $ 12,600 Percent of Sales 100% 40% 60% 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 6% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.

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 $ 90,000 36,000 54,000 41,400 $ 12,600 Percent of Sales 100% 40% 60% 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 6% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 13EA: Company A has current sales of $10,000,000 and a 45% contribution margin. Its fixed costs are...

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