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The Sterling Tire Company's income statement for 20X1 is as follows STERLING TIRE COMPANY Income Statement...

The Sterling Tire Company's income statement for 20X1 is as follows:


 STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 20X1 


Sales (23,000 tires at $66 each) 

$1,518,000

Variable costs (23,000 tires at $33) 

759,000

Fixed costs 

430,000

Earnings before interest and taxes (EBIT) 

$ 329,000

Interest expense 

51,500

Earnings before taxes (EBT) 

 $277,500
Income tax expense (30%) 83,250
Earnings after taxes (EAT) $ 194,250


a. Compute the degree of operating leverage.

b. Compute the degree of financial leverage.

c. Compute the degree of combined leverage.

d. Compute the break-even point in units.



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jeff jeffy answered 2 years ago
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