Lofft Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Using the degree of operating leverage, the estimated percent increase in net operating income as the result of a 10% increase in sales is closest to: (Round your intermediate calculations to 1 decimal place.)

Question

Lofft Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.  Using the degree of operating leverage, the estimated percent increase in net operating income as the result of a 10% increase in sales is closest to: (Round your intermediate calculations to 1 decimal place.)

Quizplus · Accepted Answer

Degree of operating leverage = Contribution margin ÷ Net operating income
= $30,000 ÷ $13,500 = 2.2
Percentage change in net operating income = Degree of operating leverage × Percentage change in sales
= 2.2 × 10% = 22%

Lofft Corporation Has Provided the Following Contribution Format Income Statement