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Friendly Pie Inc., income statement for 2017 is as follows: FRIENDLY PIE, INC. Income Statement For the Year Ended December 31, 2017 Sales (160,000 units

Friendly Pie Inc., income statement for 2017 is as follows:

FRIENDLY PIE, INC.

Income Statement

For the Year Ended December 31, 2017

Sales (160,000 units at $50) . . . . . . . . $8,000,000

Less: Variable costs (160,000 units at $30) . . 4,800,000

Fixed costs . . . . . . . . . . . . . . . 1,600,000

Earnings before interest and taxes . . . . . . . . 1,600,000

Interest expense . . . . . . . . . . . . . . . . . . . . . . 600,000

Earnings before taxes (EBT) . . .. . . . . . . . 1,000,000

Income tax expense (30%) . . . . . . . . . . .. 300,000

Earnings after taxes (EAT) . . . . . . . . . .. 700,000

Given this income statement, compute the following:

A. Degree of operating leverage.

B. Degree of financial leverage.

C. Degree of combined leverage.

D. Break even point in units and dollars.

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