V. A company’s contribution format income statement for the previous follows: Amount Sales P300,000 Variable expenses 120,000 Contribution margin 180,000 Fixed expenses 108,000 Net operating income P72,000 Required: a. Compute the company’s degree of operating leverage. b. Using the computed degree of operating leverage, estimate the effect on net operating income of a 5% increase in sales. c. Prepare an income statement using contribution format to verify your answer in (b)
V. A company’s contribution format income statement for the previous follows: Amount Sales P300,000 Variable expenses 120,000 Contribution margin 180,000 Fixed expenses 108,000 Net operating income P72,000 Required: a. Compute the company’s degree of operating leverage. b. Using the computed degree of operating leverage, estimate the effect on net operating income of a 5% increase in sales. c. Prepare an income statement using contribution format to verify your answer in (b)
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 4BE: Profit margin, investment turnover, and ROI Briggs Company has operating income of 36,000, invested...
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V. A company’s contribution format income statement for the previous follows:
Amount
Sales P300,000
Variable expenses 120,000
Contribution margin 180,000
Fixed expenses 108,000
Net operating income P72,000
Required:
a. Compute the company’s degree of operating leverage.
b. Using the computed degree of operating leverage, estimate the effect on net operating income of a 5% increase in sales.
c. Prepare an income statement using contribution format to verify your answer in (b)
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