Assume that the amounts of the company\'s total variable expenses and total fixe
ID: 2447806 • Letter: A
Question
Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $7,632 and the total fixed expenses are $13,300. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 4% increase in sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):Explanation / Answer
Degree Of operating leverage =(Sales-Variable cost)/(Sales-variable-fixed)
=(23900-7632)/(23900-7632-13300)=5.48
Degree Of operating leverage= change in operating income/change in sales
change in operating income= (5.48*4%)=21.92%