The Harding Company manufactures skates. The companys income statement for 20X1 is as follows: HARDING COMPANY Income
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The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows:
HARDING COMPANY | ||
Income Statement | ||
For the Year Ended December 31, 20X1 | ||
Sales (11,300 skates @ $76 each) | $ | 858,800 |
Variable costs (11,300 skates at $33) | 372,900 | |
Fixed costs | 280,000 | |
Earnings before interest and taxes (EBIT) | $ | 205,900 |
Interest expense | 66,500 | |
Earnings before taxes (EBT) | $ | 139,400 |
Income tax expense (20%) | 27,880 | |
Earnings after taxes (EAT) | $ | 111,520 |
a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.)
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
Related Book For
Foundations of Financial Management
ISBN: 978-1259277160
16th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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