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Q1) Engberg Company installs lawn sod in home yards. Company most newly monthly contribution format income statement follows:

  Amount Percent of Sales
Sales $80,000 100%
Less variable expanses 32,000 40%
Contribution margin 48,000 60%
Less fixed expenses 38,000  
Net operating income $10,000  

problems:

1. find out company degree of operating leverage.

2. Using degree of operating leverage, evaluate impact on net income of 5% increase in sales.

3. Verify evaluation from part (2) above by creating new contribution format income statement for company suppose a 5% increase in sales.

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  • Category:- Accounting Basics
  • Reference No.:- M918770

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