Bois Corporation has provided its contribution format income statement for January.

-If the company's sales increase by 7%,its net operating income should increase by about:

Question

Bois Corporation has provided its contribution format income statement for January.
 
-If the company's sales increase by 7%,its net operating income should increase by about:

Quizplus · Accepted Answer

Degree of operating leverage = Contribution margin ÷ Net operating income
= $166,400 ÷ $45,500 = 3.66
Percentage change in net operating income = Degree of operating leverage × Percentage change in sales
= 3.66 × 7% = 25.60%

Bois Corporation Has Provided Its Contribution Format Income Statement for January