Use the same data given in problem 13-5 (fixed cost = $20,000 per year, variable cost = $16 per unit, and sales price = $28 per unit) for Howard Beal Co. The company sold 3,000 units in 2012 and expects to sell 3,300 units in 2013. Fixed costs, variable costs per unit, and sales price per unit are assumed to remain the same in 2015 and 2016.
a. Calculate the percentage change in operating income and compare it with the percentage change in sales.
b. Comment on the operating leverage effect.
c. Calculate the degree of operating leverage using
(i) data for 2015 and 2016
(ii) data for 2015 only
d. Explain what the results obtained in (c) tell us.