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Compute the degree of operating leverage

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Reference no: EM133000523

Question - The Harding Company manufactures skates. The company's income statement for 20X1 is as follows: HARDING COMPANY Income Statement For the Year Ended December 31, 20X1

Sales (10,600 skates @ $62 each) $657,200

Variable costs (10,600 skates at $26) 275,600

Fixed costs 210,000

Earnings before interest and taxes (EBIT) $171,600

Interest expense 63,000

Earnings before taxes (EBT) $108,600

Income tax expense (40%) 43,440

Earnings after taxes (EAT) $65,160

Required -

a. Compute the degree of operating leverage.

b. Compute the degree of financial leverage.

c. Compute the degree of combined leverage.

d. Compute the break-even point in units (number of skates).

Reference no: EM133000523

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