Homework Answers
SOLUTION
a. Operating leverage = Contribution margin / Net income
= $8,250 / 2,750
= 3
b. Change in net income = 3 * 20% = 60%
Net income = 2,750 * 160% = 4,400
c1.
| Sales revenue (24,750*120%) | 29,700 |
| Variable expenses (16,500*120%) | (19,800) |
| Contribution margin | 9,900 |
| Fixed cost | (5,500) |
| Net income | 4,400 |
c2. Change in net income = (4,400-2,750) / 2,750
= 60%
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