Leverage

You are given the following income statement for Amalgamated, Inc:

Amalgamated, Inc Income Statement Year ended December 31, 2016
Net Sales	600,000
Cost of Goods Sold (Variable)	320,000
Contribution Margin	280,000
Cash fixed costs	150,000
Depreciation (fixed)	30,000
Earnings before Interest and Taxes (EBIT)	100,000
Interest expense (paid)	30,000
Earnings before taxes (Taxable Income)	70,000
Tax (expense) (30%)	21,000
Net Income	49,000

Required: Answer the following questions using the income statement above.

1. Calculate the Degree of operating leverage (DOL).

2. Calculate the Degree of financial leverage (DFL).

3. Calculate the Degree of total leverage (DTL).

4. Amalgamated is forecasting a 25 percent increase in sales for 2017. What is the projected percentage increase in net income if the calculations above hold true?

Leverage

You are given the following income statement for Amalgamated, Inc:

Amalgamated, Inc Income Statement Year ended December 31, 2016
Net Sales	600,000
Cost of Goods Sold (Variable)	320,000
Contribution Margin	280,000
Cash fixed costs	150,000
Depreciation (fixed)	30,000
Earnings before Interest and Taxes (EBIT)	100,000
Interest expense (paid)	30,000
Earnings before taxes (Taxable Income)	70,000
Tax (expense) (30%)	21,000
Net Income	49,000

Required: Answer the following questions using the income statement above.

1. Calculate the Degree of operating leverage (DOL).

2. Calculate the Degree of financial leverage (DFL).

3. Calculate the Degree of total leverage (DTL).

4. Amalgamated is forecasting a 25 percent increase in sales for 2017. What is the projected percentage increase in net income if the calculations above hold true?