Question

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): Required (Answer each question independently and always refer to the original data unless instructed otherwise.)

Sales $ 22,100

Variable expenses 12,700

Contribution margin 9,400

Fixed expenses 7,708

Net operating income $ 1,692

12.What us tge degree of operating leverage?

13.Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 4% increase in sales?

14.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 $7,708 and the total fixed expenses are $12,700. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?

15.

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 $7,708 and the total fixed expenses are $12,700. 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 percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

Answer 1

ans 12
Operating leverage=Contribution margin/Net operating income
9400/1692	5.56
Ans 13
If there is 4% increases in sales
Estimated % increase in net operating income
4*5.56	22.24	%
ans 14
Operating leverge
(22100-7708)/1692	8.51
ans 15
Operating leverge
(22100-7708)/1692	8.51
If there is 4% increases in sales
Estimated % increase in net operating income
4*8.51	34.04	%
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