Multiple-Choice Questions (PART 4):

Use the below information to answer the following TWO questions (numbered 19 and 20).

The given contribution format income statement pertains to Nisar Company for February 2020.

19. What is the degree of operating leverage?

a-2

b-3

c-7

d-10

20. What is the percent change in net operating income that will result from a 10% decrease in sales, using the degree of operating leverage?

a-10% decrease

b-20% decrease

c-20% increase

d-30% decrease

Sales Variable Expenses Contribution Margin Fixed Expenses Net Operating Income $10,000,000 7,000,000 3,000,000 2,000,000 $1,000,000