EXERCISE 6-17 (30 MINUTES)

Question

5. a. Degree of = Contribution margin = $72,000 =6operating leverage Net operating income $12,000 b. 6.00 × 50% sales increase = 300% increase in net operating income. Thus, net operating income next year would be: $12,000 + ($12,000 × 300%) = $48,000.

Answer

b. 6.00 × 50% sales increase = 300% increase in net operating income.

EXERCISE 6-17 (30 MINUTES)

5. a. Degree of = Contribution margin = $72,000 =6

operating leverage Net operating income $12,000

b. 6.00 × 50% sales increase = 300% increase in net operating income.

Thus, net operating income next year would be: $12,000 + ($12,000

× 300%) = $48,000.

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