1) What is the margin of safety percentage?

2) What is the degree of operating leverage?

3) Using the degree of operating leverage, what is the estimated percent increase in net operating income that would result from a 5% increase in unit sales?

4) Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the variable expense are $22800 and the total fixed expenses are $45000. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?

5) Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the variable expense are $22800 and the total fixed expenses are $45000. Using the degree of operating leverage, what is the estimated percent increase in net operating income of 5% increase in unit sales?

Transcribed Image Text:

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales Variable expenses Contribution margin Fixed expenses $ 75,000 45,000 30,000 22,800 $ 7,200 Net operating income Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales Variable expenses Contribution margin Fixed expenses $ 75,000 45,000 30,000 22,800 $ 7,200 Net operating income

Answer rating: 100% (QA)

Answer Explanation las Margin of dafety 18000 Margin of olaf ety Oercentage 24 Calculation cas ... View the full answer