Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format incomestatement follows:SalesVariable expensesContribution marginFixed expensesNet operating incomeAmount$ 88,00035,20052,80041,360$ 11,440.Percent ofSales100%40%60%Required:1. What is the company's degree of operating leverage?2. Using the degree of operating leverage, estimate the impact on net operating income of a 6% increase in unit sales.3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.

The contribution format income statement shows how variations in sales volume impact a company's…

Engberg Company installs lawn sod in home yards. The company's most re statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income. Amount $ 88,000 35,200 52,800 41,360 $ 11,440 Percent of Sales 100% 40% 60%

Engberg Company installs lawn sod in home yards. The company's most re statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income. Amount $ 88,000 35,200 52,800 41,360 $ 11,440 Percent of Sales 100% 40% 60%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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V. A company’s contribution format income statement for the previous follows: AmountSales P300,000Variable expenses 120,000Contribution margin 180,000Fixed expenses 108,000Net operating income P72,000 Required:a. Compute the company’s degree of operating leverage. b. Using the computed degree of operating leverage, estimate the effect on net operating income of a 5% increase in sales. c. Prepare an income statement using contribution format to verify your answer in (b)
S Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales 100% 40% 60% Sales Variable expenses Contribution margin Amount $ 123,000 49, 200 73,800 Fixed expenses 17,000 Net operating income $ 56,800 Required: 1. What is the company's degree of operating leverage? (Round to two decimal places.) 2. Using the degree of operating leverage, estimate the percentage increase in net operating income if there is a 17% increase in unit sales. (Enter the percentage as a whole number with two decimal places, i.e., 40.25.) 3. Construct a new contribution format income statement for the company assuming a 17% increase in unit sales. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the company's degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage
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Engberg Company Installs lawn sod in home yards. The company's most recent monthly contribution format Income statement follows: Percent of Sales Amount Sales 100% $ 127,000 50,800 48% Variable expenses Contribution margin 76,200 60% Fixed expenses 19,000 Net operating income $ 57,200 Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating Income of a 27% Increase in unit sales. 3. Construct a new contribution format Income statement for the company assuming a 27% Increase in unit sales. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Construct a new contribution format income statement for the company assuming a 27% increase in unit sales. Engberg Company Contribution Income Statement Amount Percent of Sales Sales ✔S 34,290 X 13,716 Variable expenses Contribution margin 20,574 Fixed expenses 19,000 Net…
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