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The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20xx Sales (20,000 tires at

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The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20xx Sales (20,000 tires at $55 each) Less: Variable costs (20,000 tires at $35) $ 1,100, eee 700,000 Contribution margin Less: Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (35%) Earnings after taxes (EAT) 400,000 300,000 100,000 60,000 4 , 14,000 $ 26,000 Given this income statement, compute the following: o. Degree of operating leverage (Round the final answer to 2 decimal places.) DOL X b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL C-1. Degree of combined leverage. (Do not round the intermediate calculations. Round the final answer to 2 decimal DCI -1. Degree of combined leverage. (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) DOL 2. Using your answers to a. and b. calculate the percentage increase in EBIT and EBT from a 20 percent increase in sales volume. (Do not round the intermediate calculations. Round the final answers to 2 decimal places.) EBIT EBT c-3. Does financial or operating leverage have the greater Impact? O DOL O DFL d. Break-even point in units. (Round the final answer to the nearest whole number.) Break-even point tires e. Break-even point considering the interest expense as a fixed cost. Break-even point tires

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