Using the income statement from Blitz Corp. below, calculate the following items. Round answers to two decimal places.

	$	$/unit	%
Sales	$5,000,000	40.00
Variable costs	3,800,000	30.40
Contribution margin	1,200,000	9.60	24%
Fixed operating costs	290,000
Earnings before interest and taxes	910,000
Interest	273,000
Earnings before taxes	637,000
Taxes (30%)	127,400
Net income	$509,600

Note: The company sold 125,000 units during the year

Required:

1. Calculate the breakeven point in sales dollars, assuming that interest is a fixed costs (2 marks)

2. Assuming the company would like to have a minimum of $250,000 in earning before taxes.

a) What is the minimum sales amount in dollars that will need to be maintained? (2 marks)

b) How many units would they need to sell? (1 mark)

3. Calculate the following:

a) the Degree of Operating Leverage (2 marks)

b) Calculate the Degree of Financial Leverage (2 marks)

c) Calculate the Degree of Combined Leverage (2 marks)

4. Using the appropriate degree of leverage from above and assuming that sales increased by 15%,

a) Calculate the expected percentage change in net income. Do not prepare a new income statement. (1 mark)

b) Compute the new net income in dollars (2 marks)