Exercise 5-9 (Algo) Compute and Use the Degree of Operating Leverage [LO5-8] Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 134,000 100% Variable expenses 53,600 40 Contribution margin 80,400 60% Fixed expenses 18,000 Net operating income $ 62,400 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 16% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 16% increase in unit sales.

Exercise 5-9 (Algo) Compute and Use the Degree of Operating Leverage [LO5-8] Engberg Company Installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Percent of Sales 100% 40 Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 134,000 53,680 80,480 18,280 $ 62,488 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 16% Increase in unit sales. 3. Construct a new contribution format Income statement for the company assuming a 16% Increase in unlt sales