Break Even Analysis

13. Healthy Foods, Inc., sells 50-pound bags of grapes to the military for $10 a bag. The fixed be of this operation argon $80,000, while the variable costs of the grapes atomic number 18 $.10 per pound. a. What is the break-even point in bags? Fixed costs $80,000 80,000 = 16,000 Bags Contribution brink 10-5 5 b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. 12,000 Bags: 12,000 x $10 (cost per bag) = 120,000 120,000- 80,000 (fixed cost) = 40,000 covariant cost = 12,000 x $5 (variable cost per bag) = 60,000 40,000-60,000 = -20,000 Loss of $20,000 25,000 Bags: 25,000 x $10 (cost per bag) = 250,000 250,000- 80,000 (fixed cost) = 170,000 Variable cost = 25,000 x $5 ( variable cost per bag) =125,000 170,000-125,000 = 45,000 amplification of $45,000 c. What is the distributor point of operating supplement at 20,000 bags and at 25,000 bags? Why does the form of operating leverage change as the quantity sold increases? 20,000 bags: undertaking= 20,000(5) = 100,000 = 5 (20,000 x 5) 80,000 20,000 toil = 5 25,000 bags: DOL= 25,000(5) = 125,000 = 2.8 (25,000 x 5) 80,000 45,000 DOL= 2.

8 The maculation of operating leverage changes because the company is increasing or change magnitude in profit. As the profit increases, the leverage decreases. d. If Healthy Foods has an yearbook interest expense of $10,000, calculate the degree of financial leverage at both 20,000 and 25,000 bags. 20,000 bags: 200,000- 80,000 (f ixed cost)- 100,000 (variable cost)= $20,000! DFL= 20,000 = 2 20,000 10,000 DFL= 2 25,000 bags: DFL= 45,000 = 1.29 45,000 10,000 DFL=1.29 e. What is the degree of combine leverage at both sales levels? DCL= DOL x DFL 20,000 Bags: DCL= 5 x 2= 10 DCL= 10 25,000 BagsDCL= 2.8 x 1.29= 3.61 DCL= 3.61If you want to get a adept essay, order it on our website: OrderCustomPaper.com

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