Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 130,000 100 % Variable expenses 52,000 40 % Contribution margin 78,000 60 % Fixed expenses 19,000 Net operating income $ 59,000 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 15% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 15% increase in sales.
Degree of operating leverage = Contribution margin /Net operating income
= 78,000/59000
= 1.32
Net operating income increases by 19.8%
| Sales | 149,500 | 100% |
| Variable expenses | 59,800 | 40% |
| Contribution margin | 89,700 | 60% |
| Fixed expenses | 19,000 | |
| Net income | 70,700 |
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 130,000 100 % Variable expenses 52,000 40 % Contribution margin 78,000 60 % Fixed expenses 16,000 Net operating income $ 62,000 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 29% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 132,000 100 % Variable expenses 52,800 40 % Contribution margin 79,200 60 % Fixed expenses 17,000 Net operating income $ 62,200 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 15% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 137,000 100 % Variable expenses 54,800 40 % Contribution margin 82,200 60 % Fixed expenses 17,000 Net operating income $ 65,200 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 12% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 143,000 100 % Variable expenses 57,200 40 % Contribution margin 85,800 60 % Fixed expenses 18,000 Net operating income $ 67,800 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 19% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 141,000 100 % Variable expenses 56,400 40 % Contribution margin 84,600 60 % Fixed expenses 22,000 Net operating income $ 62,600 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 122,000 100 % Variable expenses 48,800 40 % Contribution margin 73,200 60 % Fixed expenses 22,000 Net operating income $ 51,200 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 29% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 141,000 100 % Variable expenses 56,400 40 % Contribution margin 84,600 60 % Fixed expenses 17,000 Net operating income $ 67,600 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 127,000 100 % Variable expenses 50,800 40 % Contribution margin 76,200 60 % Fixed expenses 16,000 Net operating income $ 60,200 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 120,000 100 % Variable expenses 48,000 40 % Contribution margin 72,000 60 % Fixed expenses 22,000 Net operating income $ 50,000 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 23% increase in sales. 3. Construct a new contribution...
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 144,000 100 % Variable expenses 57,600 40 % Contribution margin 86,400 60 % Fixed expenses 17,000 Net operating income $ 69,400 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales. 3. Construct a new contribution...