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11. Freudian Slips and Gowns, Inc.'s income statement for 20XX is as follows: FREUDIAN SLIPS AND GOWNS Income Statement Contribution margin.. Less: Fixed costs
11. Freudian Slips and Gowns, Inc.'s income statement for 20XX is as follows: FREUDIAN SLIPS AND GOWNS Income Statement Contribution margin.. Less: Fixed costs Year Ended December 31, 20XX Sales (30,000 units at $25)....... $750,000 Less: Variable costs (30,000 units at $7).. 210,000 540,000 270,000 270,000 170,000 100,000 25,000 $ 75,000 Operating profit or (EBIT). Interest expense Earnings before taxes (EBT).. Income tax expense (25%)... Earnings after taxes (EAT) Given this income statement, compute the following: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage: Comment on the impact of a 30 percent increase in sales Does financial or operating leverage have the greater impact? d. Break-even point in units. e. Break-even point considering the interest expense as a fixed cost.
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