Engberg Company installs lawn sod in home yards. The company’s most recent month
ID: 2540859 • Letter: E
Question
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
Compute the company’s degree of operating leverage. (Round your answer to 2 decimal places.)
Using the degree of operating leverage, estimate the impact on net operating income of a 19% increase in sales. (Round your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).)
Construct a new contribution format income statement for the company assuming a 19% increase in sales.
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
Explanation / Answer
1.DOL=Contribution margin/Net operating income
=(77400/57400)=1.35(Approx)
2.DOL=% change in net operating income/% change in sales
Hence % change in net operating income=increase in net operating income
=(1.35*19)=25.65%
3.
Sales(129000*1.19) $153510 VC(51600*1.19) $61404 Contribution margin $92106 Fixed expenses 20000 Net operating income $72106.Related Questions
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