Question

Required information (The following information applies to the questions displayed below.] 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 Variable expenses Contribution margin Fixed expenses Net operating income $ 65, een 45,500 19,5ee 14,040 $ 5,460 15. Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,040 and the total fixed expenses are $45,500. Given this scenario and assuming the total sales remain the same. Using the degree of calculated operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? (Round your intermediate calculations and final answer to 2 decimal places.) Increase in net operating income

Answer 1

Ans-

Sales $ 65000 Variable Expenses 14040 Contribution 50960 fixed Expenses Net operating Interme $ 5460 45500 We have operating leverage = Contribution Net operating Income 50960 = 5460 9.33 and we also have, DOL - % Change in Eritie. Net operating % Change in Sales Income » % Change in Net operating income will be = = 5% X 9:33 46.65%