Question

Bottom Glove Berhad produces football gloves. The company’s income statement for 2010 is as follows: Bottom...

Bottom Glove Berhad produces football gloves. The company’s income statement for 2010 is as follows:

Bottom Glove Berhad

Income Statement

For the Year Ended December 31, 2013

Sales (20,000 gloves at RM60 each)

RM1,200,000

  Less: Variable costs (20,000 gloves at RM20)

400,000

    Fixed costs

600,000

Earnings before interest and taxes (EBIT)

200,000

Interest expense

80,000

Earnings before taxes (EBT)

120,000

Income tax expense (30%)

36,000

Earnings after taxes (EAT)

RM    84,000

Given this income statement, compute the following:

a. Degree of operating leverage.

b. Degree of financial leverage.

c. Degree of combined leverage.
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Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

a : 4 , b : 1.67, c : 6.67

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