Business
Business, 22.06.2021 15:50, moowalden1239

Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store: Sales price per pair of sandals $ 32 Variable expenses per pair of sandals 16 Contribution margin per pair of sandals $ 16 Fixed expenses per year: Building rental $ 6,400 Equipment depreciation 8,000 Selling 4,800 Administrative 12,800 Total fixed expenses $ 32,000 5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: Sales (3,000 pairs) $ 96,000 Variable expenses 48,000 Contribution margin 48,000 Fixed expenses 32,000 Net operating income $ 16,000 a. What is the store’s degree of operating leverage? b. Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase unit sales by 50% next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase unit sales by 50%?

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