How to perform dol-dfl-dcl-eps calculations


Problem:

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?

Income Statement

Sales                                                         $5,000,000
Variable operating costs                                1,000,000
Fixed operating costs                                     2,000,000
EBIT                                                           $2,000,000
Interest                                                           500,000
EBT                                                            $1,500,000
Tax (at 40%)                                                   600,000
EAT                                                              $ 900,000
Preferred dividends                                          100,000
Earnings available to common stockholders     $ 800,000
Shares outstanding                                           400,000

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Accounting Basics: How to perform dol-dfl-dcl-eps calculations
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