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Using the degree of operating leverage estimate the impact

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Reference no: EM13482056

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
   $       
         

         
         

   $       

Reference no: EM13482056

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