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Social ScienceASDF Corporate Income StatementCurrent YearUnits Sold100,000$37.84$3, 784,000$1,284,000Unit PriceSales RevenueVariable Expenses (Materials &Labor)Fixed Expenses (Marketing &Overhead)Earnings Before Interest & Taxes$350,000$2,150,000(ЕВIT)$198,000$1,952,000Paid InterestEarnings Before Taxes (EBT)$664,000ТахesNet Income after Taxes (NIAT)$1,288,000$258,000DividendsRetained Earnings$1,030,000 15. Given the above Degree of Combined Leverage (DCL), a 15% increase in sales would lead to whatPercent and Dollar increase in Net Income After Taxes (NIAT)?% Increase in NIAT= % Increase in Sales X DCLх$Increase in NIAT= % Increase in NIAT X NIATх
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ASDF Corporate Income Statement Current Year Units Sold 100,000 $37.84 $3, 784,000 $1,284,000 Unit Price Sales Revenue Variable Expenses (Materials & Labor) Fixed Expenses (Marketing & Overhead) Earnings Before Interest & Taxes $350,000 $2,150,000 (ЕВIT) $198,000 $1,952,000 Paid Interest Earnings Before Taxes (EBT) $664,000 Тахes Net Income after Taxes (NIAT) $1,288,000 $258,000 Dividends Retained Earnings $1,030,000
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15. Given the above Degree of Combined Leverage (DCL), a 15% increase in sales would lead to what Percent and Dollar increase in Net Income After Taxes (NIAT)? % Increase in NIAT = % Increase in Sales X DCL х $Increase in NIAT = % Increase in NIAT X NIAT х
Expert Answer
Hence, Combined leverage has a degree of 1.28, which is determined by dividing the difference of sales and variable cost from Before tax earnings.
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Sales- Variable cost DCL EBT $3,784,000-S1,284,000 $1,952,000 $2,500,000 $1,952,000 =1.28
Combined leverage of degree 1.28 implies that 1% change in sales will produce 1.28% changes in ...
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% Change in NIAT % Change in sales % Change in NIAT DCL= 1.28 = 15% % Change in NIAT = 15x1.28 19.2%
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