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Compute the degree of operating leverage

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Reference no: EM133153140

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 (10,500 skates @ $60 each)

$630,000

Less: Variable costs (10,500 skates at $25)

262,500

Fixed costs

200,000

Earnings before interest and taxes (EBIT)

$167,500

Interest expense

62,500

Earnings before taxes (EBT)

$105,000

Income tax expense (30%)

31,500

Earnings after taxes (EAT)

$ 73,500

Required - Given this income statement, compute the following:

Degree of operating leverage.

Degree of financial leverage.

Degree of combined leverage.

Break-even point in units (number of skates).

Reference no: EM133153140

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