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Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:
| Amount | Percent of Sales |
| Sales | $ 126,000 | 100% |
| Variable expenses | 50,400 | 40 |
| Contribution margin | 75,600 | 60% |
| Fixed expenses | 16,000 | |
| Net operating income | $ 59,600 | |
Required:
1. What is the companys degree of operating leverage?
2. Using the degree of operating leverage, estimate the impact on net operating income of a 11% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming a 11% increase in unit sales.
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