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Exercise 6-9 Compute and Use the Degree of Operating Leverage (LO6-8) Engberg Company installs lawn sod in home yards. The co
Exercise 6-9 Compute and Use the Degree of Operating Leverage (L06-8] Engberg Company installs lawn sod in home yards. The co
Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 121,000 48,400 72,600 22,000 $ 50,68
Exercise 6A-1 High-Low Method (L06-10) The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrica
November December 1,520 2,900 > 4,500 $ 7,746 Required: 1. Using the high-low method, estimate the fixed cost of electricity
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Answer #1
1) Degree of Operating leverage 1.43
Degree of Operating leverage = Ccontribution / Net Income
   =72600/50600
1.43
2) Net Operating inome increase by 25.74 %
= 18%*1.43
=25.74%
3) Engberg Company
Contribution Income Statement
Amount Percent of sales
Sales          142,780 100.00%
Variable cost            57,112 40.00%
Contribution margin            85,668 60.00%
Fixed Expense            22,000
Net Operating income            63,668
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