The Sterling Tire Company$$s income statement for $20$XX is as follows:

STERLING TIRE COMPANY

Income Statement

Year ended December $31,20$XX

Sales $(55,000$ tires at $$70$ each$)$ $ $3,850,000$

Less: Variable costs $(55,000$ tires at $$45)2,475,000$

Contribution margin $1,375,000$

Less: Fixed costs $1,100,000$

Earnings before interest and taxes $($EBIT$)275,000$

Interest expense $55,000$

Earnings before taxes $($EBT$)220,000$

Income tax expense $(30\%)66,000$

Earnings after taxes $($EAT$)$ $ $154,000$

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 $2$ 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 $20$ percent increase in sales volume. $($Do not round the intermediate calculations. Round the final answers to $2$ decimal places.$)$

EBIT

$\%$

EBT

$\%$

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

multiple choice

DFL

DOL

d$.$ Break$-$even point in units. $($Round the final answer to the nearest whole number.$)$

Break$-$even point

tires

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

Break$-$even point

tires