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):

1. 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 $6,232 and the total fixed expenses are $12,100. 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.) Degree of operating leverage _______

2. 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 $6,232 and the total fixed expenses are $12,100. 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 4% 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).

Increase in net operating income ___________

  

  

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):

Explanation / Answer

Particulars

Amount ($)

Sales

20300

Variable Expense

6232

Contribution Margin

14068

Fixed Expenses

12100

Net operating Income

1968

Degree of Operating Leverage = Contribution Margin/Net Operating Income

Degree of Operating Leverage = 14068/1968

Degree of Operating Leverage = 7.15

Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 4% increase in sales?

Degree of Operating Leverage

7.15

Percentage of Increase in sales

4%

Percentage of Increase in Net Operating Income [7.15*4%)

28.6%

Particulars

Amount ($)

Sales

20300

Variable Expense

6232

Contribution Margin

14068

Fixed Expenses

12100

Net operating Income

1968

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.