Ringsmith Company is considering two different processes to make its product-process 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 30,000 units follow: Process 1 Process 2 Sales $8,010,000 $8,010,000 Variable expenses 2,700,000 4,200,000 Contribution margin $5,310,000 $3,810,000 Less total fixed expenses 3,650,625 1,428,750 Operating income $1,659,375 $2,381,250 Unit seling price $267 $267 Unit variable cost $140 Unit contribution margin $177 $127 Required: $90 1. Compute the degree of operating leverage for each process. Round your answers to one decimal place. 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 % COS 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? Process 1 Process 2 What will be the total operating income for each process? 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? % % Process 1 Process 2