Tangerine Berhad had developed the following Income Statement for its operations ended 31 December 2022. Sales...

 

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Tangerine Berhad had developed the following Income Statement for its operations ended 31 December 2022. Sales (-) Variable Cost Contribution Margin (-) Fixed Costs Earnings Before Interest and Taxes (EBIT) Interest Expense Earnings Before Tax Taxes @ 24% Net Income RM'000 340,000 136,000 204,000 60,000 144,000 26,200 117,800 28,272 89,528 Required: a) Calculate the degree of operating leverage. b) Calculate the degree of financial leverage. c) Calculate the degree of combined leverage. d) If sales should increase by 8%, by what percent would EBIT increase? e) If EBIT should increase by 25%, by what percent would Net Income increase Tangerine Berhad had developed the following Income Statement for its operations ended 31 December 2022. Sales (-) Variable Cost Contribution Margin (-) Fixed Costs Earnings Before Interest and Taxes (EBIT) Interest Expense Earnings Before Tax Taxes @ 24% Net Income RM'000 340,000 136,000 204,000 60,000 144,000 26,200 117,800 28,272 89,528 Required: a) Calculate the degree of operating leverage. b) Calculate the degree of financial leverage. c) Calculate the degree of combined leverage. d) If sales should increase by 8%, by what percent would EBIT increase? e) If EBIT should increase by 25%, by what percent would Net Income increase

Answer rating: 100% (QA)

SOLUTION a The degree of operating leverage DOL measures the sensitivity of EBIT to changes in sales ... View the full answer