Final answer:
When Bendel Inc. experiences a 10% increase in sales, its net operating income is expected to increase by 59%, calculated by multiplying the percentage increase in sales by the operating leverage of 5.9.
Step-by-step explanation:
Operating leverage is a financial metric that shows how a percentage change in sales will affect the net operating income. This is particularly important in understanding how fixed and variable costs of a company can affect its earnings before interest and taxes (EBIT). Given that Bendel Inc. has an operating leverage of 5.9, this means that for every 1% change in sales, there is a corresponding 5.9% change in net operating income (NOI).
To calculate the change in NOI when there's a 10% increase in sales, we multiply the percentage increase in sales by the degree of operating leverage:
Change in NOI = Percentage change in sales × Operating leverage
Change in NOI = 10% × 5.9 = 59%
Therefore, with a 10% increase in sales, Bendel Inc.'s net operating income should increase by 59%.