Question
The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANYIncome...
The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANYIncome StatementFor the Year Ended December 31, 20X1Sales (12,400 skates @ $98 each)$1,215,200Variable costs (12,400 skates at $44) 545,600Fixed costs 390,000Earnings before interest and taxes (EBIT)$279,600Interest expense 72,000Earnings before taxes (EBT)$207,600Income tax expense (40%) 83,040Earnings after taxes (EAT)$124,560 a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.) b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.) c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.) d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)
Homework Answers
Answer #1
Calculate the leverages and break even units as follows:
Formulas:
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