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x Recent-Google DriveAuto Bibliography-Googls x v?Autoethnograpy: Peer Rev. xy a Connect cure https:/newconnect.mheducation.com/flow/connect.html Saved Help ter 5 10 Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows Percent Amount 1 49, ooo Sale 100 Salea Variable expenses Contribution margin Fixed 0xpenses Net operating incone ts 59,60040 89,400 608 kipped s 66,400 eBcok Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 22% increase in sales. 3, construct a new contribution format income statement for the company assuming a 22% increase in sales. Hint Print Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 What is the company's degree of operating leverage? (Round your answer to 2 decimal places.) ree of Required 2>

Explanation / Answer

Ans)

1) Contribution margin (a) = 89,400

Net operating income (b) = 66,400

Degree of operating leverage = a/b = 89400 / 66400 = 1.35

2) Degree of operating leverage (a) = 1.35

Percent increase in sales (b) = 22%

Estimated percentage increase in net operating income (a) X (b) = 22% X 1.35 = 29.7

3)   

Sales ( 149,000 X 122%) = 181780

Less: Variable expenses ( 59600 X 122%) = (72712)

Contribution margin 109068

Fixed expenses = (23000)

Net operating income 86068

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