The Harding Company manufactures skates. The company's income statement for 20X1 is as follows:
HARDING COMPANY
Income Statement
For the Year Ended December 31, 20X1
Sales (10,500 skates @ $60 each)...............................$630,000
Less: Variable costs (10,500 skates at $25).....................262,500
Fixed costs.......................................................200,000
Earnings before interest and taxes (EBIT)......................167,500
Interest expense......................................................62,500
Earnings before taxes (EBT)......................................105,000
Income tax expense (30%).........................................31,500
Earnings after taxes (EAT).......................................$ 73,500
Given this income statement, compute the following:
a. Degree of operating leverage.
b. Degree of financial leverage.
c. Degree of combined leverage.
d. Break-even point in units (number of skates).