Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Sterling Tire Companys income statement for 20X1 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (34,000
The Sterling Tire Companys income statement for 20X1 is as follows:
STERLING TIRE COMPANY | |
Income Statement | |
For the Year Ended December 31, 20X1 | |
Sales (34,000 tires at $88 each) | $ 2,992,000 |
---|---|
Variable costs (34,000 tires at $44) | 1,496,000 |
Fixed costs | 540,000 |
Earnings before interest and taxes (EBIT) | $ 956,000 |
Interest expense | 57,000 |
Earnings before taxes (EBT) | $ 899,000 |
Income tax expense (25%) | 224,750 |
Earnings after taxes (EAT) | $ 674,250 |
Compute the degree of operating leverage.
Note: Round your answer to 2 decimal places.
Compute the degree of financial leverage.
Note: Round your answer to 2 decimal places.
Compute the degree of combined leverage.
Note: Round your answer to 2 decimal places.
Compute the break-even point in units.
Note: Round your answer to the nearest whole number.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started