The Sterling Tire Company’s income statement for 2013 is as follows: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 2013 Sales (30,000 tires at $80 each)............................................................................. $2,400,000 Less: Variable costs (30,000 tires at $40)........................................................... 1,200,000 Fixed costs ...................................................................................................... 500,000 Earnings before interest and taxes (EBIT).............................................................. $ 700,000 Interest expense..................................................................................................... 55,000 Earnings before taxes (EBT)................................................................................... $ 645,000 Income tax expense (20%) ..................................................................................... 129,000 Earnings after taxes (EAT)...................................................................................... $ 516,000 Given this income statement, compute the following: Break-even point in units. Degree of operating leverage. Degree of financial leverage. Degree of combined leverage
- The Sterling Tire Company’s income statement for 2013 is as follows:
STERLING TIRE COMPANY
Income Statement
For the Year Ended December 31, 2013
Sales (30,000 tires at $80 each)............................................................................. $2,400,000
Less: Variable costs (30,000 tires at $40)........................................................... 1,200,000
Fixed costs ...................................................................................................... 500,000
Earnings before interest and taxes (EBIT).............................................................. $ 700,000
Interest expense..................................................................................................... 55,000
Earnings before taxes (EBT)................................................................................... $ 645,000
Income tax expense (20%) ..................................................................................... 129,000
Earnings after taxes (EAT)...................................................................................... $ 516,000
Given this income statement, compute the following:
- Break-even point in units.
- Degree of operating leverage.
- Degree of financial leverage.
- Degree of combined leverage
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 1 images
