Sales (20,000 tires at $60 each) Less: Variable costs (20,000 tires at $30) Contribution margin Less: Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (34%) Earnings after taxes (EAT) Income Statement Year Ended December 31, 20XX $1,200,000 600,000 600,000 400,000 200,000 50,000 150,000 51,000 $ 99,000 Page 158 Given this income statement, compute the following: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage: Comment on the impact of a 20 percent increase in sales. Does financial or operating leverage have the greater impact? d. Break-even point in units. e. Break-even point considering the interest expense as a fixed cost. 4