ST-2. (Leverage analysis) You have developed the following analytical income statement for your corpotation. It represents the most recent year's operations, which ended yesterday. Your supervisor in the financial studies office has just handed you a memorandum that asked for written responses to the following questions:

a.ˇ At this level of output, what is the degree of operating leverage?

b. What is the degree of financial leverage?

c. What is the degree of combined leverage?

d. What is the finn's break-even point in sales dollars?

e.ˇ Ifsales should increase by 30 percent, by what percent would earnings before taxes (and net income) increase?

f. Prepare an analytical income statement that verifies the calculations from part (e).

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Sales Variable costs Revenue before fixed costs Fixed costs EBIT Interest expense Eamings before taxes Taxes (0.50) Net income $20,000,000 12,000,000 $ 8,000,000 5,000,000 $ 3,000,000 1,000,000 $ 2,000,000 1,000,000 $ 1,000,000