In the Most Recent Month,Eckstrom Corporation's Total Contribution Margin Was

question 224

Essay

In the most recent month,Eckstrom Corporation's total contribution margin was $208,000 and its net operating income $39,400.
Required:
a.Compute the degree of operating leverage to two decimal places.
b.Using the degree of operating leverage,estimate the percentage change in net operating income that should result from a 1% increase in sales.

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Definitions:

Cost

The cost involved in buying an item or the financial outlay needed to produce a good or service.

Mark-up

The amount added to the cost price of goods to cover overhead and profit, expressed as a percentage of the cost.

Markdown

A reduction from the original or listed price of a good or service, often used to stimulate sales or clear out inventory.

Gross Profit

The financial term for the difference between revenue and the cost of goods sold, before deducting overheads, payroll, taxation, and interest payments.