Exercise 5-9 Compute and Use the Degree of Operating Leverage [LO5-8] Engberg Company installs lawn sod in home yards.

The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 149,000 100% Variable expenses 59,600 40% Contribution margin 89,400 60% Fixed expenses 24,000 Net operating income $ 65,400 Required:

1. Compute the companys degree of operating leverage. (Round your answer to 2 decimal places.)

2. Using the degree of operating leverage, estimate the impact on net operating income of a 19% increase in sales. (Round your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).)

3. Construct a new contribution format income statement for the company assuming a 19% increase in sales.