The Sterling Tire Companys income statement for 20X1 is as follows:

Sterling Tire Company

Income Statement for the Year Ended December 31, 20X1

Sales (26,000 tires at $72 each) $1,872,000

Variable costs ( 26,000 tires at $36) 936,000

Fixed costs 460,000

Earnings before interest and taxes (EBIT) $476,000

Interest expense 53,000

Earnings before taxes (EBT) 423,000

Income Tax expense (30%) 126,900

Earnings after taxes (EAT) $296,100

Compute the degree of operating leverage

a. Degree of operating leverage:

b. Degree of financial leverage:

c. Degree of combined leverage:

d. Break-even point: