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Income Statement For the Year Ended December 31, 20X1 begin{tabular}{|l|r|} hline & hline Sales (10,500 skates @ $60 each & $630,000 hline Less:
Income Statement For the Year Ended December 31, 20X1 \begin{tabular}{|l|r|} \hline & \\ \hline Sales (10,500 skates @ $60 each & $630,000 \\ \hline Less: Variable costs (10,500 skates at $25) & 262,500 \\ \hline Fixed costs & 200,000 \\ \hline Earnings before interest and taxes (EBIT) & 167,500 \\ \hline Interest expense & 62,500 \\ \hline Earnings before taxes (EBT) & 105,000 \\ \hline Income tax expense (30\%) & 31,500 \\ \hline Earnings after taxes (EAT) & $73,500 \\ \hline \end{tabular} Given this income statement, compute the following: a. Degree of operating leverage. DOL =(SVC)/PDOL=(630,000262,500)/200,000 b. Degree of financial leverage. Using the Income Statement (above) and the information (below), compute the degree of operating leverage, degree of financial leverage, degree of combined leverage, and the break-even point in units. Information: Unit sales Selling price Variable cost per unit a. Degree of operating leverage 2.19 times b. Degree of financial leverage 1.6 times c. Degree of combined leverage 3.5 times d. Break-even point in units 5,714 skates
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