Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 137,000 100% Variable expenses 54,800 40% Contribution margin 82,200 60% Fixed expenses 23,000 Net operating income $ 59,200 Required:

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

2. Using the degree of operating leverage, estimate the impact on net operating income of a 25% increase in sales. (Round your intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).)

3. Construct a new contribution format income statement for the company assuming a 25% increase in sales.