Answer:
It will increase by 37.5%
Explanation:
<u>we solve for the variable cost first:</u>
135,000 fixed cost / 1,800 units = 75
average cost 150
less unit fixed cost of 75
variable cost 75
contribution: (350 - 75)/ 350 = 0,7857
Now we construct the operating income at the given sales level
sales revenue 1,800 x 350 = 630,000
variable cost 1,800 x 75 = <u> (135,000)</u>
contribution 495,000
fixed cost <u> 135,000 </u>
operating income 360,000
increase of 15% in sales 1,800 x 1.15 = 2,070
sales revenue 2,070 x 350 = 724,500
variable cost 2.070 x 75 =<u> (155,250) </u>
contribution 569,250
fixed cost <u> (135,000) </u>
operating income 434,250
Now, we solve for the operating leverage
495,000 / 360,000 = 1.375
360,000 x (1 + 1.375 x 0.15) = 434,250