Computing break-even point in units for sterling tire

Question

Question:

The Sterling Tire Company’s income statement for 2010 is as follows:
                                             STERLING TIRE COMPANY
                                                  income statement
                                 For the year Ended December 31,2010
Sales (20,000 tires at $60 each)                                     1,200,000
Less: Variable costs(20,000 tires at $30)                          600,000
Fixed costs                                                                         400,000
Earning Before interest and taxes(ebit)                             200,000
Internet expense                                                                 50,000
Earning before taxes (EBT)                                                 150,000
Income tax expense(40%)                                                    45,000
Earning after taxes (EAT)                                                    105,000



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.