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The Sterling Tire Companys income statement for 20X1 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (45,000

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

STERLING TIRE COMPANY
Income Statement
For the Year Ended December 31, 20X1
Sales (45,000 tires at $110 each) $ 4,950,000
Variable costs (45,000 tires at $55) 2,475,000
Fixed costs 650,000
Earnings before interest and taxes (EBIT) $ 1,825,000
Interest expense 62,500
Earnings before taxes (EBT) $ 1,762,500
Income tax expense (20%) 352,500
Earnings after taxes (EAT) $ 1,410,000

a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.)

b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.)

c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.)

d. Compute the break-even point in units. (Round your answer to the nearest whole number.)

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