Eneliko Company installs home theater systems. The company€™s most recent monthly contribution format income statement appears below:

Required:
1. Compute the company€™s degree of operating leverage.
2. Using the degree of operating leverage, estimate the impact on net operating income of a 10% increase in sales.
3. Verify your estimate from part (2) above by constructing a new contribution format income statement for the company assuming a 10% increase insales.

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Percent Amount of Sales Sales. Variable expenses Contribution margin Fixed expenses Net operating income. $120,000 84.000 100% 70% 30% 36,000 24,000 $ 12,000