Degree of operating leverage-degree of financial leverage

Assignment Help Financial Accounting

Reference no: EM13749915

The Harding Company manufactures skates. The company’s income statement for 2013 is as follows.

HARDING COMPANY

Income Statement

For the year ended December 31, 2013

Sales (10,500 skates at $60 each)………………………………………………………$630,000

Less: Variable costs (10,500 skates at $25)…………………………………………….262, 000

Fixed Costs……………………………………………………………………….200, 000

Earnings before interest and taxes (IBIT)………………………………………………$167,500

Interest expense…………………………………………………………………………62,500

Interest before taxes (EBIT)…………………………………………………………….$105,000

Income tax expense (30%)……………………………………………………………__31,500___

Earnings after taxes (EAT)…………………………………………………………….$ 73,500

Giving this income statement, compute the following:

a. Degree of operating leverage

b. Degree of financial leverage.

c. Degree of combined leverage.

d. Break even points in units.

Reference no: EM13749915

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