Exercise 18-25 (Algo) Computing and analyzing operating leverage LO A2

Hudson Company reports the following contribution margin income statement.

HUDSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales (9,000 units at $280 each)	$ 2,520,000
Variable costs (9,000 units at $210 each)	1,890,000
Contribution margin	$ 630,000
Fixed costs	504,000
Income	$ 126,000

1. Compute the companys degree of operating leverage. 2. If sales decrease by 5% in the next year, what will be the companys income? 3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%.

Complete this question by entering your answers in the tabs below. Compute the company's degree of operating leverage. (Round your answer to 1 decimal place.) Complete this question by entering your answers in the tabs below. If sales decrease by 5% in the next year, what will be the company's income? Complete this question by entering your answers in the tabs below. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%