Compute and Use the Degree of Operating Leverage [LO8]
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Eneliko Company installs home theater systems. The company's most recent monthly contribution format income statement appears below:
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|
Amount |
Percent
of Sales |
| Sales |
$ |
141,000 |
100% |
| Variable expenses |
|
56,400 |
40% |
|
|
|
|
| Contribution margin |
|
84,600 |
60% |
| Fixed expenses |
|
23,000 |
|
|
|
|
|
| Net operating income |
$ |
61,600 |
|
|
|
|
|
|
| Required: |
| 1. |
Compute the company's degree of operating leverage. (Round your answer to 2 decimal places.)
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| 2. |
Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales. (Input the amount as a positive value. Round your intermediate calculations and final answers to 2 decimal places.)
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| 3. |
Construct a new contribution format income statement for the company assuming a 20% increase in sales. (Input all amounts as positive values except losses which should be indicated by a minus sign.)
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