Answers
Contribution margin income statement
| Sales | 1360000 |
| Less: Variable expense | |
| Cost of goods sold | 648000 |
| Sales commission | 136000 |
| Shipping expense | 8000 |
| Total Variable expense | 792000 |
| Contribution margin | 568000 |
| Less: Fixed expense | |
| Administrative salaries expense | 89000 |
| Advertising expense | 31000 |
| Depreciation expense | 41000 |
| Total fixed cost | 161000 |
| Net income | 407000 |
b) Degree of operating leverage = Contribution margin/Net income = 568000/407000 = 1.40
c) Net income increase by 1.40*20 = 28
Net income = 407000*1.28 = 520960
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