5-9,5-15-40 Help Save & Exit Su Check my w Engberg Company installs lawn sod fol

Question

5-9,5-15-40 Help Save & Exit Su Check my w Engberg Company installs lawn sod follows: in home yards. The company's most recent monthly contribution format income statement s 124,808 49,680 74,480 24,000 s se,4ee Sales 1 00% 40% 60% Sales Variable expenses Contribution margin Net operating income Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimatethe impact on net operating in me of a 28% increase in sales. / 3. Construct a new contribution format income statement for the company assuming a 28% increase in sales. Complete this question by entering your answers in the tabs below. Prey 101 2EE? Next >

Explanation / Answer

Req 1: Degree of Operating leverage: Contribution / net income = 74,400 /50400 = 1.48 Req 2: % increase in sales: 28% Degree of Operating lverage 1.48 % Increase in net income 41.40% (i.e. 28%*1.48) Req 3: CONTRIBUTION MARGIN INCOME STATEMENT: Amount % sales Sales revenue 158720 100% Lless: variable cost 63488 40% Contribution margin   95232 60% less: Fixed cost 24000 Net income 71232 Increase in net income: 71232 -50400 = 20832 % Increase in income (20832/50400*100)=41.4%

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