Question

Exercise 6-9 Compute and use the Degree of Operating Leverage (LO6-8) Engberg Company installs lawn sod in home yards. The co
Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follo
Percent of Sales 1008 408 608 Amount $ 129,000 51,600 77,400 16,000 $ 61,400 Sales Variable expenses Contribution margin Fixe
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Answer #1
1
Contribution margin 77400
Divide by Net operating income 61400
Degree of Operating leverage 1.26
2
Net operating income increase 36.54% =29%*1.26
Net operating income increases by 36.56% or 36.54%
3
Contribution Income Statement
Amount Percent of sales
Sales 166410 100%
Variable expenses 66564 40%
Contribution margin 99846 60%
Fixed expenses 16000
Net operating income 83846
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