Stoppkotte Corporation has provided its contribution format income statement for April. If the company's sales increase by 10%,its net operating income should increase by about:

Question

Stoppkotte Corporation has provided its contribution format income statement for April.  If the company's sales increase by 10%,its net operating income should increase by about:

Quizplus · Accepted Answer

Degree of operating leverage = Contribution margin ÷ Net operating income
= $259,000 ÷ $74,800 = 3.46
Percentage change in net operating income = Degree of operating leverage × Percentage change in sales
= 3.46 × 10% = 34.36%

Stoppkotte Corporation Has Provided Its Contribution Format Income Statement for April