Operating leverage - Superior Door Company sells pre-hung doors to home builders. The doors are sold for $60 each. Variable costs are $42 per door and fixed costs total $450,000 per year. The company is currently selling 30,000 doors per year. Prepare a contribution format income statement for the company at the present level of sales and compute the degree of operating leverage.Management is confident that the company can sell 37,500 doors next year (an increase of 7,500 doors, or 25% over current sales). Compute the expected net operating income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.)

Operating leverage in the measure of change in operating income resulting from change in revenue.

Answered: Operating leverage - Superior Door…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

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Problem 5EB: Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90....

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Operating leverage - Superior Door Company sells pre-hung doors to home builders. The doors are sold for $60 each. Variable costs are $42 per door and fixed costs total $450,000 per year. The company is currently selling 30,000 doors per year.

Prepare a contribution format income statement for the company at the present level of sales and compute the degree of operating leverage.
Management is confident that the company can sell 37,500 doors next year (an increase of 7,500 doors, or 25% over current sales). Compute the expected net operating income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.)

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