Question
The Sterling Tire Companys income statement for 2013 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 2013 Sales (32,000
The Sterling Tire Companys income statement for 2013 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 2013 Sales (32,000 tires at $84 each) $ 2,688,000 Variable costs (32,000 tires at $42) 1,344,000 Fixed costs 520,000 Earnings before interest and taxes (EBIT) $ 824,000 Interest expense 56,000 Earnings before taxes (EBT) $ 768,000 Income tax expense (30%) 230,400 Earnings after taxes (EAT) $ 537,600 Given this income statement, compute the following: a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.) Degree of operating leverage b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.) Degree of financial leverage c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.) Degree of combined leverage d. Compute the break-even point in units. (Round your answer to the nearest whole number.) Break-even point units
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