Reference no: EM132776945
The Sterling Tire Company's income statement for 20X1 is as follows:
STERLING TIRE COMPANY
Income Statement
For the Year Ended December 31, 20X1
Sales (45,000 tires at $110 each)$4,950,000
Variable costs (45,000 tires at $55) 2,475,000
Fixed costs 650,000
Earnings before interest and taxes (EBIT)$1,825,000
Interest expense 62,500
Earnings before taxes (EBT)$1,762,500
Income tax expense (20%) 352,500
Earnings after taxes (EAT)$1,410,000
Problem 1: Compute the degree of operating leverage. (Round your answer to 2 decimal places.)
Problem 2: Compute the degree of financial leverage. (Round your answer to 2 decimal places.)
Problem 3: Compute the degree of combined leverage. (Round your answer to 2 decimal places.)
Problem 4: Compute the break-even point in units.
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: Compute the break-even point in units. Earnings before interest and taxes (EBIT)$1,825,000.Variable costs (45,000 tires at $55) 2,475,000
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