The following information applies to the questions displayed

The following information applies to the questions displayed below Oslo Company prepared the following contribution format income statement based on a sales volume of ,000 units (the relevant range of production is 500 units to 1,500 units) Sales Variable expenses $20,600 12,200 Contribution margin Fixed expenses 8,400 6,468 Net operating income $ 1,932

Solution

contribution margin ratio =contribution /sales

             = 8400/20600

              = .4078

BEP ($) =Fixed cost /CM ratio

    = 6468 / .4078

    = $ 15861

11a)Margin of safety sales = Actual sales -BEP sales

         = 20600 -15861

          = $ 4739

11b)Margin of safety (%) =Margin of safety in dollar /actual sales

     = 4739 /20600

      = .23 or 23%

12)Degree of operating leverage =contribution /net operating income

   =8400/1932

   = 4.35

13)% Increase in net operating income =% increase in sales *degree of operating leverage

             = 3* 4.35

             = 13.05%

14)

New contribution = 20600-6468=14132

Net operating income = 14132-12200= 1932

Degree of operating leverage = 14132 /1932 = 7.31