# Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income...

###### Question:

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

 Amount Percent of Sales Sales $137,000 100 % Variable expenses 54,800 40 % Contribution margin 82,200 60 % Fixed expenses 17,000 Net operating income$ 65,200

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 12% increase in sales.

3. Construct a new contribution format income statement for the company assuming a 12% increase in sales.

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