Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
Amount Percent of Sales
Sales $ 139,000 100%
Variable expenses 55,600 40%
Contribution margin 83,400 60%
Fixed expenses 18,000
Net operating income $ 65,400
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 23% 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 23% increase in sales.