The Harding Company manufactures skates. The companys income statement for 20XX is as follows:

HARDING COMPANY Income Statement Year ended December 31, 20XX Sales (10,000 skates at $50)$500,000 Less: Variable costs (10,000 skates at $20) 200,000 Contribution margin 300,000 Less: Fixed costs

150,000

Operating profit or (EBIT) 150,000 Interest expense 60,000 Earnings before taxes (EBT) 90,000 Income tax expense (40%) 36,000 Earnings after taxes (EAT)$54,000

Given this income statement, compute the following:

a. Degree of operating leverage. (Round the final answer to 2 decimal places.)

DOL X

b. Degree of financial leverage. (Round the final answer to 4 decimal places.)

DFL X

c-1. Degree of combined leverage. (Do not round the intermediate calculations. Round the final answer to 2 decimal places.)

DCL X

c-2. Using your answers to a. and b. calculate the percentage increase in EBIT and EBT from a 30 percent increase in sales volume. (Round the final answer to the nearest whole number.)

EBIT % EBT %

c-3. Does financial or operating leverage have the greater impact?

multiple choice

DFL

DOL

d. Break-even point in skates.

BE skates

e. Break-even point considering the interest expense as a fixed cost.

BE skates