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Evaluate degree of operating leverage

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Reference no: EM13200176

1. Elizabeth Bicycle Company makes bicycles.  The firm's income statement is as follows:

Elizabeth Bicycle Company

Income Statement

 

 

Sales (11,900 bicycles at $140)

  1,666,000

Less:  Variable costs (11,900 bicycles at $60)

    714,000

Fixed costs

    520,000

Earnings before interest and taxes (EBIT)

    432,000

  - Interest (I)

    125,000

Earnings before taxes (EBT)

    307,000

  - Taxes (T)

    122,800

Earnings after taxes (EAT)

    184,200

 

 

Compute

a. Degree of operating leverage

b. Degree of financial leverage

c. Degreee of combined leverage

d. The break-even point

Reference no: EM13200176

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