Question

Company manufactures skates. The company’s income statement for 2013 is as follows:
HARDING COMPANY
Income Statement
For the Year Ended December 31, 2013
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
Given this income statement, compute the following:
a. Degree of operating leverage.
b. Degree of financial leverage.
c. Degree of combined leverage.
d. Break-even point in units (number of skates).



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  • CreatedOctober 14, 2014
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