Below are the information related to a cosmetic company in Mumbai:

Selling price per unit: $180

Variable cost per unit: $80

Fixed cost per year : $400,000

Debt financing: $800,000 at 10% interest

Number of shares : 400,000 shares

Tax rate: 24%

Solve:

At a sales level of 50,000 units:

i. Calculate the break-even point.

ii. Calculate the degree of operating leverage (DOL), degree of financial leverage (DFL) and

degree of total leverage (DTL).

iii. Based on your answer in (ii), show the effect on the earnings per share (EPS) if:

a. Sales increase by 20%

b. Sales decrease by 30%