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Exercise $2-9($Algo$)$ Compute and Use the Degree of Operating Leverage $[$LO$2-8]$

Engberg Company installs lawn sod in home yards. The company$$s most recent monthly contribution format income statement follows:

Amount Percent of Sales

Sales $ $84,000100\%$

Variable expenses $33,60040$

Contribution margin $50,40060\%$

Fixed expenses $38,640$

Net operating income $ $11,760$

Required:

What is the company$$s degree of operating leverage?

Using the degree of operating leverage, estimate the impact on net operating income of a $7\%$ increase in unit sales.

Construct a new contribution format income statement for the company assuming a $7\%$ increase in unit sales.