Lo 3.5wallace industries has total contribution margin of $58,560 and net income of $24,400 for the month of april. wallace expects sales volume to increase by 5% in may. what are the degree of operating leverage and the expected percent change in income for wallace industries?

0.42 and 2.2%
0.42 and 5%
2.4 and 12%
2.5 and 13%

2.4 and 12%

Explanation:

We have these data:

-contribution margin(CM): $58,560

-net income (NI) :$24,400

-expected sales increase (ESI): 5%

-the degree of  operating leverage (DoL) : ?

-expected percent change in income(ECI): ?

DoL=CM/NI= 58560/24400= 2.4

The change in sales will have effect on the contribution margin, revenues and etc. But we have summarized formula to find the expected change on net income:

ECI= ESI* DoL= 5* 2.4= 12%

The expected net income increase will be 12 %

answerservice script;

answer makes less frequent trips to the bank and firms make less frequent price changes;