Please, use these formulas that are in the image only. STERLING TIRE COMPANYIncome StatementFor the Year Ended December 31, 2013Sales (30,000 tires at $80 each)..$2,400,000Less: Variable costs (30,000 tires at $40).1,200,000Fixed costs .500,000Earnings before interest and taxes (EBIT)..$ 700,000Interest expense..55,000Earnings before taxes (EBT)..$ 645,000Income tax expense (20%)129,000Earnings after taxes (EAT)..$ 516,000Given this income statement, compute the following:a. Degree of operating leverage.b. Degree of financial leverage.c. Degree of combined leverage.d. Break-even point in units. Using these formulas:1-Breakeven Point Formula:FCQ =p- vc2-Degree of Operating Leverage (DOL):Percentage change in EBITPercentage change in salesDOL3-The formula for calculating the degree of operatingleverage at a base sales level, Q, is the following:eX (P – vc)DOL(Q) = Qx (P –- vc) – FCQ: the sales level. P: sale price. vc: variable operating costs per unit.FC: fixed operating costs.4-The Degree Of Financial Leverage (DFL):Percentage change in EPSPercentage change in EBITDFLEBITDFL at base level EBIT =EBIT - I - (PD x5-degree of total leverage (DTL)Percentage change in EPSPercentage change in salesDTLex (P – vc)PDDTL at Q units =ex (P – vc) – FC – 1 –(2)

Break even refers to the situation of no profit and no loss. At the point of break even, business is…

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: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage. d. Break-even point in units.

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: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage. d. Break-even point in units.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

ABC LCC sells its products on a gross profit of 20% on sales. The following information Is extracted from its annual accounts for the year ended 31st March 2020. Amount $ 40,00,000 12,00,000 9,60,000 12,00,000 Manufacturing expenses (one month in arrears) Administration expenses (one month in arrears) 4,80,000 Sales promotion expenses (Payable half yearly in advance) 200,000 Sales (3months credit) Raw materials Wages (15 days in arrears) The company enjoys one month's credit from suppliers of raw materials and maintains 2 months stock of raw materials and one and a half months finished goods. Cash balance is maintained at $100,000 as a precautionary balance. Assuming a 10%margin, find out the working capital requirements of ABC LCC.
Company XYZ it made sales of $230,000 during 2019 the fixed expenses were $90,000 and variable expense with $50,000 the cost of goods as sold was $35,000 calculate the gross margin for XYZ
Cullumber Inc. had sales of $2,816,000 for the first quarter of 2022. In making the sales, the company incurred the following costs and expenses. Variable Fixed Cost of goods sold $1,177,600 $563,200 Selling expenses 89,600 57,600 Administrative expenses 110,080 125,440 Prepare a CVP income statement for the quarter ended March 31, 2022. Sales CULLUMBER INC. CVP Income Statement For the Quarter Ended March 31, 2022 Variable Costs Contribution Margin Fixed Costs Ε
Hamby Inc. has sales of $2,000,000 for the first quarter of 2017. In making the sales, the company incurred the following costs and expenses.Cost of goods sold Selling expenses Administrative expenses.Variable$760,000 95,000 79,000Fixed$600,000 60,000 66,000Prepare a CVP income statement for the quarter ended March 31, 2017.
Ivanhoe Inc. has sales of $1,720,000 for the first quarter of 2025. In making the sales, the company incurred the following costs and expenses. Cost of goods sold Selling expenses Administrative expenses Variable $653,600 81,700 67,940 Fixed $516,000 51,600 56,760 Prepare a CVP income statement for the quarter ended March 31, 2025.
Blossom Inc. had sales of $2,300,000 for the first quarter of 2020. In making the sales, the company incurred the following costs and expenses. Variable Fixed Cost of goods sold $936,000 $473,000 Selling expenses 119,000 71,000 Administrative expenses 116,000 120,000 Prepare a CVP income statement for the quarter ended March 31, 2020. BLOSSOM INC. CVP Income Statement For the Quarter Ended March 31, 2020
Sales (all on credit) Cost of goods sold Gross profit Sales and administrative expenses Fixed lease expenses Depreciation Operating profit Interest expense Profit before taxes Taxes (35%) Net income TEW COMPANY Income Statement For the year ended December 31 Refer to the tables above. Fixed charge coverage for Tew Company is O 23x O 1.95x $500,000 $200,000 $300,000 $20,000 $10,000 $40,000 $230,000 $20,000 $210,000 $ 73,500 $ 136,500
Blossom Manufacturing Ltd.'s sales for the year ended December 31, 2022 are $1.00 million. The expenses for 2022 are as follows: Cost of goods sold Selling expenses Administrative expenses Variable $320,000 56,000 27,920 Fixed $180,000 26,400 36,000 Prepare a detailed CVP income statement for the year ended December 31, 2022. Blossom Manufacturing Ltd. CVP Income Statement $ $
The information provided below was taken from the books of Uli Enterprise for the financial year ended 31 May 2018. Extract of statement of comprehensive income for the year ended 31 May 2018 R Sales 480 000 Cost of sales 240 000 Rent income 12 000 Advertising 4 800 Salaries and wages 72 000 Rates and taxes 1 200 Other operating expenses 96 000 Additional information: 1. All inventories are priced at cost plus 25%. 2. Sales are divided equally each month. Sales are expected to increase by 18% for the financial year ending 31 May 2019. 3. Fifty percent (50%) of the sales are for cash and the balance is on credit. Debtors normally pay their accounts as follows:  40% in the month of the sale, and these debtors are entitled to a 5% discount;  55% one month after the sale The balance is usually written off as bad debts. 4. Purchases for June and July are expected to be 20 000 per month. All purchases are for cash. 5. In terms of the lease agreement rent is received monthly. The rent for…
65. Presented below are excerpts from the income statements of Ralos Company for the years ended December 31, 2021 and 2020. 2021 2020 Inc (Dec) Net sales P2,750,000 P2,500,000 P250,000 Cost of goods sold 1,584,000 1,600,000 ( 16,000) Gross margin P1,166,000 P 900,000 P234,000 The unit cost decreased by 10% on January 1, 2021. What is the effect on sales due to change in selling price? Group of answer choices P250,000 increase P 75,000 increase P 0 P275,000 increase
Pharoah Inc. had sales of $2,320,000 for the first quarter of 2022 (it sold 232,000 units). In making the sales, the company incurred the following costs and expenses. Cost of goods sold Selling expenses Administrative expenses Variable V $841,000 86,000 117,000 $ Fixed $488,000 Prepare a CVP income statement for the quarter ended March 31, 2022. (Round per unit answers to 2 decimal places, e.g. 15.25.) $ 47,000 144,000 Total PHAROAH INC. CVP Income Statement $ $ Per Unit Percent of Sales % % %
Dr. Zhivago Diagnostics Corporation's income statement for 20X1 is as follows: $ 2,390,000 1,400,000 Sales Cost of goods sold Gross profit Selling and administrative expense Operating profit Interest expense Income before taxes. Taxes (30%) Income after taxes a. Compute the profit margin for 20X1. Note: Input the profit margin as a percent rounded to 2 decimal places. Profit margin $ 990,000 352,000 $ 638,000 52,700 $585,300 175,590 $ 409,710 b. Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2? Note: Input the profit margin as a percent rounded to 2 decimal places. Income after taxes Profit margin 20X2

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS