Refer to the information in Exercise 21-16. 1. Compute the companys degree of operating leverage for 2019.

Question:

Refer to the information in Exercise 21-16.

1. Compute the company’s degree of operating leverage for 2019.

2. If sales decrease by 5% in 2020, what will be the company’s pretax income?

3. Assume sales for 2020 decrease by 5%. Prepare a contribution margin income statement for 2020.

Data from Exercise 21-16

Hudson Co. reports the contribution margin income statement for 2019 below.

Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,600 units at $225 each)..... $2,160,000 V

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Refer to the information in Exercise 21-16. 1. Compute the companys degree of operating leverage for 2019.

Question:

Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,600 units at $225 each)..... $2,160,000 Variable costs (9,600 units at $180 each). 1,728,000 Contribution margin .... 432,000 Fixed costs 324,000 $ 108,000 Pretax income..

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