Angie Silva has recently opened The Sandal Shop, a store that specializes in fashionable sandals in Brisbane, Australia. Angie has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of sandal shops. As a first step, she has prepared the following analysis for her new store:
(e) Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: (i). What is the store's degree of operating leverage? (ii). Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 50% next year. What would be the expected percentage increase in net operating income? Use the degree of operating leverage to compute your answer.