Magazine Inc Required:
A

Essay

Magazine Inc. had the following income statement for the current year: $$\begin{array} { l r } \text { Sales } & \$ 50,000 \\\text { Variable costs } & 30,000 \\\text { Contribution margin } & \$ 20,000 \\\text { Fixed costs } & 8,000 \\ \text { Operating income } & \$ 12,000 \\\end{array}$$ Required:
A. Calculate the degree of operating leverage ratio.
B. If sales increase by 40 percent, what will be the percentage change in income?
C. If sales decrease by 10 percent how much will income decrease as a percentage?