1. Ringsmith Company is considering two different processes to make its productprocess 1 and process 2. Process 1 requires Ringsmith to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but fixed factory overhead is considerably lower. Relevant data for a sales level of 36,000 units follow:

   		Process 1		Process 2
   Sales		$9,216,000		$9,216,000
   Variable expenses		3,132,000		4,752,000
   Contribution margin		$6,084,000		$4,464,000
   Less total fixed expenses		3,694,805		1,386,890
   Operating income		$2,389,195		$3,077,110
   Unit selling price		$256		$256
   Unit variable cost		$87		$132
   Unit contribution margin		$169		$124

   Required:

   1. Compute the degree of operating leverage for each process. Round your answers to one decimal place. Use the rounded answers in subsequent calculations.

   Process 1
   Process 2

   2. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process?

   Process 1		%
   Process 2		%

   What will be the increase in operating income for each system? Round your answers to the nearest dollar.

   Process 1	$
   Process 2	$

   What will be the total operating income for each process? Round your intermediate calculations and final answers to the nearest dollar. Use the rounded answers in subsequent calculations.

   Process 1	$
   Process 2	$

   3. What if unit sales are 10 percent lower than budgeted? By what percentage will operating income decrease for each process?

   Process 1		%
   Process 2		%

   What will be the total operating income for each process? Round your answers to the nearest dollar.

   Process 1	$
   Process 2	$