The following table represents forecasted sales information for Iniesta Inc.

The following table represents forecasted sales information for Iniesta Inc.

2011 Sales With 20% Unit

Forecasted Operations Increase Change

Sales In Units (Millions) 200.00 240.00 40.00

Sales Revenues $3000.00 $3600.00 $600.00

Variable Cost of Goods Sold (2000.00) (2400.00) (400.00)

Gross Profit $1000.00 $1200.00 $200.00

Fixed Operating Costs ($160.00) ($160.00) (0.00)

Net Operating Income $840.00 $1040.00 $200.00

1. By how much will net operating income increase for the given increase in sales and associated expenses?

2. What is the degree of operating leverage (DOL) for the projected change of 20% from the original 2011 forecast.

3. Assuming an identical cost structure compared to a company with a degree of operating leverage 1.44 how risky is Iniesta Inc?

(More Risky Less Risky or Equally Risky)