Superior Door Company sells prehung doors to home builders. The doors are sold for $69 each. Variable costs are $49 per door, and fixed costs total $86,000 per year. The company is currently selling 8,600 doors per year.
1-a. Prepare a contribution format income statement for the company at the present level of sales.
1-b. Compute the degree of operating leverage.
2. Management is confident that the company can sell 10,578 doors next year (an increase of 1,978, or 23%, over current sales).
a. Compute the expected percentage increase in net operating income for next year.
b. Compute the expected net operating income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.)