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The Harding Company manufactures skates.

/in /by

Question

The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows:

HARDING COMPANY
Income Statement
For the Year Ended December 31, 20X1
Sales (12,400 skates @ $98 each)$1,215,200
Variable costs (12,400 skates at $44) 545,600
Fixed costs 390,000
Earnings before interest and taxes (EBIT)$279,600
Interest expense 72,000
Earnings before taxes (EBT)$207,600
Income tax expense (40%) 83,040
Earnings after taxes (EAT)$124,560


a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.)
  

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b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.)
  

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c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.)
  

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d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)
  

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