Degree of operating leverage-degree of combined leverage

Question

Question: The Sosa Company produces baseball gloves. The company's income statement for 2004 is as follows:

SOSA COMPANY
Income Statement

For the Year Ended December 31, 2004

Sales (20,000 gloves at $60 each)                 $1,200,000
Less: Variable costs (20,000 gloves at $20)         400,000
Fixed costs                                                       600,000
Earnings before interest and taxes (EBIT)            200,000
Interest expense                                                 80,000
Earnings before taxes (EBT)                                 20,000
Income tax expense (30%)                                  36,000
Earnings after taxes (EAT)                                 $ 84,000

Given this income statement, compute the following:

1. Degree of operating leverage.
2. Degree of financial leverage.
3. Degree of combined leverage.