The Alexander Company reported the following income statement for 2016:

Assume that all depreciation and 75 percent of the firm's selling, general, and administrative expenses are fixed costs and that the remainder of the firm's operating expenses are variable costs. 

a. Determine Alexander's fixed costs, variable costs, and variable cost ratio.
b. Based on its 2016 sales, calculate the following for the firm:

i. DOL 

ii. DFL 

iii. DCL
c. Assume that next year's sales increase by 15 percent, that fixed operating and financial costs remain constant, and that the variable cost ratio and tax rate also remain constant. Use the leverage figures just calculated to forecast next year's EPS.
d. Show the validity of this forecast by constructing Alexander's income statement for next year according to the revised format.

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$ 15,000,000 Sales Less: Operating expenses $ 6,000,000 Wages, salaries, benefits Raw materials 3,000,000 1,500,000 Depreciation General, selling, and administrative expenses 1,500,000 Total operating expenses 12,000,000 $ 3,000,000 Earnings before interest and taxes (EBIT) Less: Interest expense 750,000 $ 2,250,000 Earnings before taxes Less: Income taxes 1,000,000 $ 1,250,000 Earnings after taxes Less: Preferred dividends 250,000 $ 1,000,000 Earnings available to common stockholders Earnings per share-250,000 shares outstanding 4.00