Kilburn Enterprises expects sales of 50,000 units at a $10 per unit in the coming year and must meet the following: variable operating costs at $6 per unit; fixed operating costs $40,000; interest of $50,000 and preferred stock dividends of $36,000. Kilburn is taxed at the 40% rate.
a. What is Kilburn’s degree of total leverage?
b. If Kilburn’s DOL is 1.50 and its DFL is 2.66, what is its DTL?