Compute the degree of operating leverage

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Reference no: EM13792352

Bic Corporation's contribution format income statement for the most recent month follows:

Sales $121,000

Variable Expenses 60,500

Contributon Margin 60,500

Fixed Expenses 43,700

Net Operating Income $16,800

Required:

a. Compute the degree of operating leverage to two decimal places.

b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from an 8% increase in sales. Prove your answer by preparing a new contribution format income statement, showing the new net operating income after the increase in sales.

Reference no: EM13792352

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