Help with B, C and D ONLY, please.

The Harding Company manufactures skates. The companys income statement for 20X1 is as follows:

HARDING COMPANY
Income Statement
For the Year Ended December 31, 20X1
Sales (11,200 skates @ $74 each)	$	828,800
Variable costs (11,200 skates at $32)		358,400
Fixed costs		270,000
Earnings before interest and taxes (EBIT)	$	200,400
Interest expense		66,000
Earnings before taxes (EBT)	$	134,400
Income tax expense (40%)		53,760
Earnings after taxes (EAT)	$	80,640

a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.)

Degree of operating leverage_______________

Expert Answer

a. Degree of operting leverage = 2.35

Formula = ( Contribution / EBIT)

contribution = Sales - Variable costs

= $828,800 - $358,400

= $470,400

EBIT = $200,400

Degree of operting leverage = ( $470,400 / $200,400)

= 2.35

b Compute the degree of financial leverage. (Round your answer to 2 decimal places.)

c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.)

d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)