What is the company's margin 3. EXERCISE 5-9 Compute and Use the Degree of Operating Leverage LO5-8 Engberg Company installs lawn sod in home yards. The company's most recent monthly contribu- tion format income statement follows: Sales Variable expenses Contribution margin Fixed expenses. Net operating income Amount Percent of Sales $80,000 32,000 48,000 38,000 $10,000 Required: What is the company's degree of operating leverage? Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. Verify your estimate from part (2) above by constructing a new contribution format income statement for the company assuming a 5% increase in sales. 100% 40% 60%
