Chapter 5 Assignment 5.00 points The Harding Company manufactures skates The com

Question

Chapter 5 Assignment 5.00 points The Harding Company manufactures skates The company's income statement for 20x 1 is as follows HARDING COMPANY Income Statement For the Year Ended December 31. 20X1 Sales (10,800 skates$66 each) Variable costs (10,800 skates at $28) Fixed costs Earmings before interest and taxes (EBIT) Interest expense Earnings before taces (EBT) Income tax expense (30%) Earmings after faxes (EAT) S 712,800 302.400 230,000 180 400 64,000 116,400 S 81,480 a. Compute the degree of operating leverage (Round your answer to 2 decimal places Degree of operating leverage b. Compute the degree of financial leverage (Round your answyr to 2 decimal piace%) Degree of tinancial leverage c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.) d. Compute the break-even point in units (number of skates) [Round your answer to the nearest whole number.) O Type here to search 0

Explanation / Answer

a)

Degree of operating leverage = [ Q(P - V)] / [Q(P -V) - F]

Degree of operating leverage = [ 10,800(66 - 28)] / [ 10,800(66 - 28) - 230,000

Degree of operating leverage = 410,400 / 180,400

Degree of operating leverage = 2.27

b)

Degree of financial leverage = [ Q(P - V) - F] / [Q(P -V) - F - C]

Degree of financial leverage = [ 10,800(66 - 28) - 230,000 ] / [ 10,800(66 - 28) - 230,000 - 64,000]

Degree of financial leverage = 180,400 / 116,400

Degree of financial leverage = 1.55

c)

Degree of combined leverage = Degree of opearting leverage * degree of financial leverage

Degree of combined leverage = 2.27 * 1.55

Degree of combined leverage = 3.52

d)

Break even point = ( F + C) / (P -V)

Break even point = ( 230,000 + 64,000) / ( 66 - 28)

Break even point = 294,000 / 38

Break even point = 7,737

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.