Reference no: EM133006559

Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows:

                                    Amount                Percent of Sales
Sales                    $ 125,000                 100%
Variable expenses        50,000                   40
Contribution margin      75,000                   60%
Fixed expenses            18,000
Net operating income  $ 57,000

Required:

Problem 1. What is the company's degree of operating leverage?

Problem 2. Using the degree of operating leverage, estimate the impact on net operating income of a 19% increase in unit sales.

Problem 3. Construct a new contribution format income statement for the company assuming a 19% increase in unit sales.