Consider the following income statement of Delta Manufacturing Company (DMC): Income Statement of DMC as on December 31, 2023 Particulars Amount Rs…
2024 · Solved Question with Answer
Consider the following income statement of Delta Manufacturing Company (DMC):
Income Statement of DMC as on December 31, 2023
| Particulars | Amount Rs |
| Sales (10,000 units @ Rs 40 per unit) | 400,000 |
| Less: Variable costs (10,000 units @ Rs 20 per unit) | 200,000 |
| Contribution margin | 200,000 |
| Less: Fixed costs | 100,000 |
| Earnings before interest & Tax (EBIT) | 100,000 |
| Less: Interest | 20,000 |
| Earning before tax (EBT) | 80,000 |
| Less: Tax @ 30 percent | 24,000 |
| Earnings after tax or net income | 56,000 |
At present, DMC has total number of 10,000 shares outstanding.
a. What is the earning per share of DMC?
b. Calculate operating the break-even point for DMC.
c. Calculate the degree of operating leverage, degree of financial leverage and the degree of combined (total) leverage.
d. What would be percentage increase in net profit if DMC increases sales by 20 percent?