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Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format...

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Accounting

Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:

Amount Percent of Sales
Sales $ 131,000 100%
Variable expenses 52,400 40
Contribution margin 78,600 60%
Fixed expenses 22,000
Net operating income $ 56,600

Required:

1. What is the companys degree of operating leverage?

2. Using the degree of operating leverage, estimate the impact on net operating income of a 21% increase in unit sales.

3. Construct a new contribution format income statement for the company assuming a 21% increase in unit sales.

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