A company has a sales of $\mathrm{.}2,00,000.$ The variable costs are $40$ per cent of the sales and fixed expenses are $\mathrm{.}60,000.$ The interest on borrowed capital is assumed to be $\mathrm{.}20,000.$ Compute the combined leverage and show the impact on taxable income when sales increases by $10$ per cent.

Total Marks: $12$

Evaluation Rubrics:

Criteria$/$Description

Marks

Format

$2$ marks

Calculation of EBIT at BASE level

$3$ marks

Calculation of EBIT at Changed level

$3$ marks

Calculation of Leverages

$2$ marks

Interpretation

$2$ marks

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