Calculate the degree of financial leverage if price per units is 15.00. Please give your answer rounded to two decimal places. Your Answer:

Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.5.2MBA: Financial leverage Costco Wholesale Corporation (COST) and Wel-Mart Stroes Inc. (WMT)reported the...
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Please see this empty income statement from Spuds and Suds for FY 2020. Calculate the degree of financial leverage if price per units is 15.00. Please give your answer rounded to two decimal places. Your Answer:

Spuds and Suds
Income Statement
For the Year Ended Dec. 31, 2020
Sales
Less: Variable Costs
Less: Fixed Costs
Earnings Before Interest and Taxes
Less: Interest Expense
Earnings Before Taxes
Taxes
2020
GA
$
400,000
GA
$
50,000
Net Income
Less: Preferred Dividends
$
50,000
Net Income Available to Common
Common Shares Outstanding
1,000,000
Earnings per Share
Assumptions
Price per Unit
Unit Sales
Variable Costs as a Percent of Sales
Tax Rate
Operating Break-even Point (Units)
Operating Break-even Point (Dollars)
Units to Meet EBIT Target
150,000
65%
20%
Transcribed Image Text:Spuds and Suds Income Statement For the Year Ended Dec. 31, 2020 Sales Less: Variable Costs Less: Fixed Costs Earnings Before Interest and Taxes Less: Interest Expense Earnings Before Taxes Taxes 2020 GA $ 400,000 GA $ 50,000 Net Income Less: Preferred Dividends $ 50,000 Net Income Available to Common Common Shares Outstanding 1,000,000 Earnings per Share Assumptions Price per Unit Unit Sales Variable Costs as a Percent of Sales Tax Rate Operating Break-even Point (Units) Operating Break-even Point (Dollars) Units to Meet EBIT Target 150,000 65% 20%
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