Problem
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):
|
Sales
|
$ 25,000
|
|
Variable expenses
|
17,500
|
|
Contribution margin
|
7,500
|
|
Fixed expenses
|
4,200
|
|
Net operating income
|
$ 3,300
|
Using the degree of operating leverage, what is the estimated percent increase in net operating income that would result from a 5% increase in unit sales?