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Question(s) / Instruction(s):

ABC 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                               16,000   

 Net operating income   $66,200   

 

Requirement 1:

Compute the company's degree of operating leverage.

Requirement 2:

Using the degree of operating leverage, estimate the impact on net operating income of a 15% increase in sales.

 

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