Answers
Contribution margin income statement
Sales | 1085500 |
Less: Variable cost | |
Cost of goods sold | 552500 |
Sales commission | 54275 |
Shipping and handling expense | 26000 |
Total variable cost | 632775 |
Contribution margin | 452725 |
Less: Fixed cost | |
Administrative salaries expense | 86000 |
Advertising expense | 36000 |
Depreciation expense | 41000 |
Total Fixed cost | 163000 |
Operating income | 289725 |
Degree of operating leverage = Contribution margin/Operating income = 452725/289725 = 1.56
Operating income increase by (1.56*10) = 15.60 or 16%
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