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The Sterling Tire Company's income statement for 20X1 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (28,000
The Sterling Tire Company's income statement for 20X1 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (28,000 tires at $76 each) Variable costs (28,000 tires at $38) Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (25%) Earnings after taxes (EAT) $ 2,128,000 1,064,000 480,000 $ 584,000 54,000 $ 530,000 132,500 $397,500 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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