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Compute and Use the Degree of Operating Leverage [LO8]

Eneliko Company installs home theater systems. The company's most recent monthly contribution format income statement appears below:

	Amount		Percent of Sales
Sales	$	141,000	100%
Variable expenses		56,400	40%

Contribution margin		84,600	60%
Fixed expenses		23,000

Net operating income	$	61,600

Required:
1.	Compute the company's degree of operating leverage. (Round your answer to 2 decimal places.)

Degree of operating leverage

2.	Using the degree of operating leverage, estimate the impact on net operating income of a 20% increase in sales. (Input the amount as a positive value. Round your intermediate calculations and final answers to 2 decimal places.)

Net operating income by

3.	Construct a new contribution format income statement for the company assuming a 20% increase in sales. (Input all amounts as positive values except losses which should be indicated by a minus sign.)

Contribution Income Statement
	Total
	$





	$

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9797232

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