15-7B. (Leverage analysis) You have developed the following analytical income statement for your corporation. It represents the most recent year's operations, which ended yesterday.

Your supervisor in the controller's office has just handed you a memorandum asking for written responses to the following questions:
a.ı At this level of output, what is the degree of operating leverage?
b.ı What is the degree of financial leverage?
c.ı What is the degree ofcombined leverage?
d.ı What is the firm's break-even point in sales dollars?
e.ı If sales should increase by 20 percent, by what percent would earnings before taxes (and net income) increase?

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Sales $40,000,000 Variable costs 16,000,000 Revenue before fixed costs $24,000,000 Fixed costs 10,000,000 EBIT Interest expense Earnings before taxes Taxes Net income $14,000,000 1,150,000 $12,850,000 3,750,000 $ 9,100,000