Page 119 - DBP5043

CLASS EXERCISE

Example 1

Income Statement for LOTUS Berhad is as follows :

RM
Sales (10,000,000 X RM1) 10,000,000

(-)Variable cost (6,000,000)
4,000,000
(-) Fixed cost (2,500,000)

EBIT 1,500,000
Interest (500,000)

Earning before tax 1,000,000
Tax (350,000)
Net Income 650,000

a) Based on the information above, you are required to calculate

i. The degree of operating leverage
ii. The degree of financial leverage
iii. The degree of combine leverage

iv. Break even point in unit and RM

b) If sales increase by 20%, what will happen on :
i. Earning before interest and tax (EBIT)
ii. Earning per share

c) Provide income statement to show increased sales by 20% and

prove your answer in (b) above.
d) Calculate the percentage change in Earning per share if EBIT
increased by 25%.