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Compute the expected percentage increase

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Calculate the the degree of operating leverage, the expected percentage increase in net operating income,expected increase in net operating income and expected total net operating income for the next year.

TLK Ltd. manufactures small size fans to be used in load shedding areas. Each fan has a rechargeable battery and a built in charging circuit. TLK sells a fan for $120. The annual sale is 30,000 fans. Variable and fixed cost data is given below:

Variable expenses $84 per fan

Fixed expenses $900,000 per year

Required:

Question A. Prepare contribution margin income statement and compute the degree of operating leverage.

Question B. Next year the sales are expected to increase by 7,500 fans. Compute the expected percentage increase in net operating income expected increase in net operating income and expected total net operating income for the next year.

Reference no: EM132510074

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