Question

Required information The Foundational 15 [LO6-1, LO6-3, LO6-4, L06-5, LO6-6, LO6-7, LO6-8) [The following information applies to the questions displayed below) 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): of 15 o Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 15,000 9,000 6,000 3,120 $ 2,889 Foundational 6-12 12. What is the degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage

Answer 1

Req 12.
Degree of Operating leverage:
Contribution margin		6,000
Divide: Net Income		2,880
Degree of Operating leverage:	2.083
Req 13.
% Increase in sales			5%
Multiply: Degree of Operating leverage	2.083
% Increase in Net Income		10.42%
Req14.
Revised Contribution margin Income Statement:
Sales revenue		15,000
Less: Variable expense	3,120
Contribution margin		11,880
Less: Fixed expense		9,000
Net Income		2,880
Degree of Operating leverage:
Contribution margin		11,880
Divide: Net Income		2,880
Degree of Operating leverage:	4.125
Req 15.
% Increase in sales			5%
Multiply: Degree of Operating leverage	4.125
% Increase in Net Income		20.63%