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    Harding Company: Operating And Financial leverage

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    Can you help me with the following problem:

    The Harding company manufactures skates. The company's income statement for 2001 is as follows:

    HARDING COMPANY
    Income statement
    For the Year Ended December 31, 2001

    Sales (10,000 skates @$50 each)........................$500,000
    Less Variable costs (10,000 skates at $20)......... 200,000
    Fixed costs................................................... 150,000
    _________
    Earnings before interest and taxes (EBIT)............ 150,000
    Interest expense............................................... 60,000
    __________
    Earnings before taxes (EBT)............................... 90,000
    Income tax expenses (40%).............................. 36,000
    __________
    Earnings after taxes (EAT).................................. $54,000

    a.) How do I compute the Degree of operating leverage?
    b.) How do I compute the Degree of financial leverage?
    c.) How do I compute the degree of combined leverage?
    d.) How do I compute the Break-even point in units (number of skates)?

    Your help is GREATLY appreciated, Thank you!!

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    https://brainmass.com/business/finance/harding-company-operating-financial-leverage-31921

    Solution Preview

    a.) How do I compute the Degree of operating leverage?
    DOL = (Sale-VC) / (Sale - VC- FC) = (500, -200,) / (500, -200, ...

    $2.19

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