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Imagination Park competes with Splash World by providing a variety of rides. Imagination Park sells tickets at $90 per personThe next question after is "Estimate the new operating income if total sales increase by 10%?"

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Answer #1

1)

Contribution margin:

= 7,700 X ($90 - $18)

= $554,400

Operating income:

= $554,400 - $464,400

= $90,000

Degree of operating leverage:

= Contribution margin / Operating income

= $554,400 / $90,000

= 6.16

2)

Increase in operating income:

= 6.16 X 10

= 61.6%

New operating income:

= $90,000 + ($90,000 X 61.6%)

= $145,440

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