How do estimate the impact on net operating income

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Reference no: EM132693956

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

Amount Percent of Sales

Sales $131,000 100%

Variable expenses 52,400 40%

Contribution margin 78,600 60%

Fixed expenses 19,000

Net operating income $59,600

Required:

Problem 1. What is the company's degree of operating leverage?(Round your answer to 2 decimal places.)

Problem 2. Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales.(Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e 0.1234 should be entered as 12.34)

Problem 3. Construct a new contribution format income statement for the company assuming a 20% increase in sales.

Reference no: EM132693956

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