Using the income statement below compute the following items. Round answers to two decimal places.

Sales $ 9,600,000 Variable costs 6,800,000 Contribution margin 2,800,000 Fixed operating costs 1,600,000 Earnings before interest and taxes 1,200,000 Interest 400,000 Earnings before taxes 800,000 Taxes (25%) 200,000 Earnings after taxes $ 600,000

Note: The company produced and sold 80,000 units this year

1)Calculate the breakeven point in sales dollars, assuming that interest is a fixed cost. (2 marks)

2) Assuming they would like to have $1,000,000 in earnings before taxes.

a) What is the sales amount in dollars that will need to be achieved? (2 marks)

b)How many units would they need to sell? (1 mark)

3) a) Calculate the Degree of Operating Leverage. (1 mark)

b) Calculate the Degree of Financial Leverage. (1 mark)

c) Calculate their Degree of Combined Leverage (1 mark)

4. Using the appropriate degree of leverage from above and assuming that sales increase by 10%,

a) Calculate the expected percentage change in net income. Do not prepare a new income statement. (1 mark)

b) Compute the new net income in dollars. (2 marks)