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eBuy Corporate Income Statement eBuy Corporation 20x1
Income Statement (in $millions)
Sales 2,877
Cost of Goods Sold (100% variable) 1,012
Operating Expense (100% fixed) 821
Depreciation 364
Earnings Before Interest and Taxes 680
Interest Expense 320
Earnings Before Taxes 360
Taxes 140
Net Income 220
What is the degree of combined leverage for eBuy?

Respuesta :

Zviko

Answer:

First, calculate the Degree of Operating Leverage (DOL).

The DOL shows the times Net Income Before Interest and Tax will change as a result of a change in sales contribution.

Degree of Operating Leverage (DOL) = Contribution ÷ Net Income

Therefore,

Degree of Operating Leverage (DOL) = $4,000,000 ÷ $3,760,000

                                                              = 1.06

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