Lubke Corporation's contribution format income statement for the most recent month follows:
Sales Variable expenses Contribution margin Fixed expenses Net operating income
$506,000 $236,500 $269,500 $241,700 $27,800
Required:
1. Compute the degree of operating leverage to two decimal places.
2. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from a 3% increase in sales.
3. Compute the breakeven point in sales.
4. What level of sales does Lubke need to earn a net income of $50,000 before taxes?
The tax rate is 30%.