Unit 05 Saved The Sterling Tire Company's income statement for 20XX is as follows: $ 2,200,000 1,200,000 51:23 STERLING TIRE COMPANY Income Statement Year ended December 31, 20XX Sales (40,000 tires at $55 each) Less: Variable costs (40,000 tires at $30) Contribution margin Less: Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (308) Earnings after taxes (BAT) 1,000,000 750,000 250,000 50,000 200,000 60,000 $ 140,000 Given this income statement, compute the following: a. Degree of operating leverage (Round the final answer to 2 decimal places.) DOL b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL 125 X Prey 1 of 9 N FLE 8 ... W MacBook Air TO i Saved HE DFL 1.25 X c-1. Degree of combined leverage. (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) DCL c-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? ODOL 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 Prey 1 of 9 Next >