After expansion, sales are expected to increase by $100,000. Variable costs will remain at 30 percent of sales, and the fixed manufacturing cost will increase to $60,000.

Required: Calculate the following (to get proper credit, show detailed calculation including formula used)

A) Break-Even in units (Assume interest as a fixed expense) [4 Marks]

B) Calculate the Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL) before expansion [4 Marks]

C) Prepare Income Statements for the two financial plans. [8 Marks]

D) Calculate EBIT/EPS indifference point [4 Marks]

The following is the income statement for Economical Footwear Company for the year 2022. The company is planning to expand production. The expansion will cost $400,000, which can either be financed by bonds at an interest rate of 12 percent or by selling 2,000 shares @ $200 per share