Please help me SalesVariable expensesContribution marginFixed expensesNet operating income.Amount$ 140,00056,00084,00022,000$ 62,000Required: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 21% increase in sales.3. Construct a new contribution format income statement for the company assuming a 21% increase in sales.Complete this question by entering your answers in the tabs below.Required 1 Required 2 Required 3Percent ofSales100%40%60%SalesVariable expensesContribution marginConstruct a new contribution format income statement for the company assuming a 21% increase in sales.Fixed expensesNet operating incomeEngberg CompanyContribution Income StatementAmount Percent of Sales$ 189,005105 %75,605%113,400105 %22,000$ 91,400

Degree of operating leverage indicates the how much change in net operating income will be there if…

Sales Variable expenses Contribution margin Fixed expenses Net operating income. Amount $ 140,000 56,000 84,000 22,000 $ 62,000 Percent of Sales 100% 40% 60% Required: 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 21% increase in sales. . Construct a new contribution format income statement for the company assuming a 21% increase in sales.

Sales Variable expenses Contribution margin Fixed expenses Net operating income. Amount $ 140,000 56,000 84,000 22,000 $ 62,000 Percent of Sales 100% 40% 60% Required: 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 21% increase in sales. . Construct a new contribution format income statement for the company assuming a 21% increase in sales.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 21E: Income statements for two different companies in the same industry are as follows: Required: 1....

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Company A has current sales of $10,000,000 and a 45% contribution margin. Its fixed costs are $3,000,000. Company B is a service firm with current service revenue of $5,000,000 and a 20% contribution margin. Company Bs fixed costs are $500,000. Compute the degree of operating leverage for both companies. Which company will benefit most from a 25% increase in sales? Explain why.
Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
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V. A company’s contribution format income statement for the previous follows: AmountSales P300,000Variable expenses 120,000Contribution margin 180,000Fixed expenses 108,000Net operating income P72,000 Required:a. Compute the company’s degree of operating leverage. b. Using the computed degree of operating leverage, estimate the effect on net operating income of a 5% increase in sales. c. Prepare an income statement using contribution format to verify your answer in (b)
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