Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income...

Transcribed Image Text:

Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales Variable expenses Contribution margin Fixed expenses Amount $ 90,000 Sales 100% 36,000 54,000 40 60% 41,400 $ 12,600 Net operating income Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 8% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 8% increase in unit sales. Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales Variable expenses Contribution margin Fixed expenses Amount $ 90,000 Sales 100% 36,000 54,000 40 60% 41,400 $ 12,600 Net operating income Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 8% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 8% increase in unit sales.