Mainland Manufacturing has provided you with their Income statement for 2022 Mainland Manufacturing Ltd. Income Statement...

 

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Mainland Manufacturing has provided you with their Income statement for 2022 Mainland Manufacturing Ltd. Income Statement Sales (50,000 tires at $65 each) Less: Variable costs (50,000 tires at $35) Contribution margin Less: Fixed costs Year ended December 31, 2022 Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (34%) Earnings after taxes (EAT) EBIT EBT X DFL DOL $ $ Break-even point 3,250,000 1,750,000 1,500,000 1,200,000 They have been told that leverage can be used to magnify the results of the firm and have come to you for advice on how this can be done. Given this income statement, calculate the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL |X b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL c-1. Degree of combined leverage. (Do not round the Intermediate calculations. Round the final answer to 2 decimal places.) DCL c-3. Does financial or operating leverage have the greater Impact? 300,000 60,000 c-2. Using your answers to a. and b. calculate the percentage Increase in EBIT and EBT from a 20 percent increase in sales volume. (Do not round the Intermediate calculations. Round the final answers to 2 decimal places.) 240,000 81,600 158,400 d. Break-even point in units. (Round the final answer to the nearest whole number.) tires e. Break-even point considering the Interest expense as a fixed cost. Break-even point tires Mainland Manufacturing has provided you with their Income statement for 2022 Mainland Manufacturing Ltd. Income Statement Sales (50,000 tires at $65 each) Less: Variable costs (50,000 tires at $35) Contribution margin Less: Fixed costs Year ended December 31, 2022 Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (34%) Earnings after taxes (EAT) EBIT EBT X DFL DOL $ $ Break-even point 3,250,000 1,750,000 1,500,000 1,200,000 They have been told that leverage can be used to magnify the results of the firm and have come to you for advice on how this can be done. Given this income statement, calculate the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL |X b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL c-1. Degree of combined leverage. (Do not round the Intermediate calculations. Round the final answer to 2 decimal places.) DCL c-3. Does financial or operating leverage have the greater Impact? 300,000 60,000 c-2. Using your answers to a. and b. calculate the percentage Increase in EBIT and EBT from a 20 percent increase in sales volume. (Do not round the Intermediate calculations. Round the final answers to 2 decimal places.) 240,000 81,600 158,400 d. Break-even point in units. (Round the final answer to the nearest whole number.) tires e. Break-even point considering the Interest expense as a fixed cost. Break-even point tires

Answer rating: 100% (QA)

a Degree of Operating Leverage DOL DOL Contribution Margin EBIT DOL 1200000 240000 DOL 5 b Degree o... View the full answer