Given the following information (from an Income Statement), how would you calculate the DOL, DFL, DCL and if sales increase to $5,500,000 how would you forecast EPS?
Variable operating costs 1,000,000
Fixed operating costs 2,000,000
Tax (at 40%) 600,000
EAT $ 900,000
Preferred dividends 100,000
Earnings available to common stockholders $ 800,000
Shares outstanding 400,000
Calculation is in millions
DOL = (Sales - Variable Costs) / (Sales - Variable Costs - Fixed costs)
= (5 - 1) / (5-1 - 2) = 2
DFL = EBIT / (EBIT ...
The solution explains how to calculate DOL, DFL, DCL and EPS.