Solution a:
Contribution margin = 8000 * ($80 - $40) = $320,000
Net operating income = Contribution margin - Fixed costs = $320,000 - $240,000 = $80,000
Operating leverage = Contribution margin / net operating income = $320,000 / $80,000 = 4.0
Solution b:
If volume increases by 9%, % increase in net operating income = % increase in sales * Operating leverage = 9%*4 = 36%
Solution c:
If volume increases by 4%, % decrease in net operating income = % decrease in sales * Operating leverage = 4%*4 = 16%
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