Oslo Company prepared the following contribution format income statement based o

Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,232 and the total fixed expenses are $12,900. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? (Round your answer to 2 decimal places.)

  

Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,232 and the total fixed expenses are $12,900. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

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Explanation / Answer

Explanation:Before solving this problem one should know what is operating leverage.So it measures company's fixed cost over its total cost.In simple words it is used to evalute the break even point of the company.to calculate operating leverage divide co's Contribution margin by net operating Income.

So,The solution of the problem is as below-Given

Sales                                  Variable cost Contribution Margin Fixed Cost Net operating Income

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