520 Ch. 5 CVP Example Johnson Company distributes a single product. The company's sales and expenses for last month are as follows: Total Per Unit Sales $400,000 Variable expenses 300.000 15 Contribution margin 100,000 Fixed expenses 60.000 Net operating income 40.000 a) Calculate the contribution margin ratio. b) Calculate the dollar level of sales that will lead to a target net operating income of $95.000. Calculate the degree of operating leverage. d) Assume that the company estimates that sales will increase by $50,000. How much will net operating income increase by assuming no change in fixed costs? (Use the concept of contribution margin ratio. Do not prepare a new income statement.). Assume that the company estimates that sales will increase by 60%. What will the percentage increase be in net operating income and what will be the dollar increase in net operating income assuming no change in fixed costs? (Use the concept of degree of operating leverage. Do not prepare a new income statement.) f) Last month the firm sold 20,000 units and generated a net operating income of $40,000. A manager believes that an increase in the sales commission of $2 per unit combined with an increase of $30,000 in advertising will lead to an 80% increase in sales. How much will net operating income change under the proposed strategy? e)