Problem: The following is an analytical income statement for The Swill & Spoon, a fine dining establishment:
Sales $ 150,000
Variable costs 90,000
Revenue before fixed costs $ 60,000
Fixed costs 35,000
EBIT $ 25,000
Interest expense $ 10,000
Earnings before taxes $ 15,000
Taxes (.34) 5,100
Net income $ 9,900
Q1. Calculate the degree of operating leverage at this output level.
Q2. Calculate the degree of financial leverage at this level of EBIT.
Q3. What is the degree of combined leverage?