Question

Following is the income statement for Mueller Mufflers for the month of June 2013:
MUELLER MUFFLERS
Contribution Margin Income Statement
Month Ended June 30, 2013
Sales Revenue (200 units × $ 175) ......... $ 35,000
Variable Costs (200 units × $ 75) .......... 15,000
Contribution Margin ............... 20,000
Fixed Costs ................. 12,500
Operating Income ................ $ 7,500

Requirements
1. Calculate the degree of operating leverage.
2. Use the degree of operating leverage calculated in Requirement 1 to estimate the change in operating income if total sales increase by 15% (assuming no change in sales price per unit).
3. Verify your answer in Requirement 2 by preparing a contribution margin income statement with the total sales increase of 15%.



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  • CreatedJanuary 16, 2015
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