Impact of Increased Sales on Operating Income Using the Degree of Operating Leverage Chillmax Company had planned to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is$21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 3,500 units sold is$58,500. The degree of operating leverage is 2.3. Now Chillmax expects to increase sales by 10% next year. Required: 1. Calculate the percent change in operating income expected. 2. Calculate the operating income expected next year using the percent change in operating income calculated in Requirement 1.

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

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Chapter 7, Problem 34BEB
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