4G 4G Il 11 11:27 91 Variable costs will remain at 40 percent of sales, and fixed costs will increase by $550,000. The tax rate is 35 percent. (a) What is the break-even point? (b) Calculate the degree of operating leverage, the degree of financial leverage, and the degree of combined leverage before expansion. (c) Construct the income statement for the two financial plans. BSRM Income Statement 201X Sales $3,000,000 Less: Variable costs (40%) $1,200,000 Fixed costs 800.000 Earnings before interest and taxes 1,000,000 Lesst Interest expense 400.000 Earnings before taxes 600,000 Less: Taxes (@ 35%) 210.000 Earnings after taxes $ 390,000 Shares 100,000 Earnings per share $ 3.90 Your answer . 4. Listed below is the summary balance sheet for Red Star Corp for fiscal years ended 2011 and 2010 (all numbers in thousands of euros). Red Star Corp had no capital expenditures or asset sales in 2010 and 2011.