Answer a.
Selling Price per bag = $10.00
Variable Cost per bag = $0.10 * 50
Variable Cost per bag = $5.00
Contribution Margin per bag = Selling Price per bag - Variable
Cost per bag
Contribution Margin per bag = $10.00 - $5.00
Contribution Margin per bag = $5.00
Fixed Costs = $95,000
Breakeven Point = Fixed Costs / Contribution Margin per
bag
Breakeven Point = $95,000 / $5.00
Breakeven Point = 19,000 bags
Answer b.
At 15,000 bags:
Profit = Units Sold * Contribution Margin per bag - Fixed
Costs
Profit = 15,000 * $5.00 - $95,000
Profit = -$20,000
At 35,000 bags:
Profit = Units Sold * Contribution Margin per bag - Fixed
Costs
Profit = 35,000 * $5.00 - $95,000
Profit = $80,000
Answer c.
At 23,000 bags:
Contribution Margin = Units Sold * Contribution Margin per
bag
Contribution Margin = 23,000 * $5.00
Contribution Margin = $115,000
Operating Profit = Contribution Margin - Fixed Costs
Operating Profit = $115,000 - $95,000
Operating Profit = $20,000
Degree of Operating Leverage = Contribution Margin / Operating
Profit
Degree of Operating Leverage = $115,000 / $20,000
Degree of Operating Leverage = 5.75
At 35,000 bags:
Contribution Margin = Units Sold * Contribution Margin per
bag
Contribution Margin = 35,000 * $5.00
Contribution Margin = $175,000
Operating Profit = Contribution Margin - Fixed Costs
Operating Profit = $175,000 - $95,000
Operating Profit = $80,000
Degree of Operating Leverage = Contribution Margin / Operating
Profit
Degree of Operating Leverage = $175,000 / $80,000
Degree of Operating Leverage = 2.19
Answer d.
At 23,000 bags:
Operating Profit = Contribution Margin - Fixed Costs
Operating Profit = $115,000 - $95,000
Operating Profit = $20,000
Taxable Income = Operating Profit - Interest Expense
Taxable Income = $20,000 - $12,000
Taxable Income = $8,000
Degree of Financial Leverage = Operating Profit / Taxable
Income
Degree of Financial Leverage = $20,000 / $8,000
Degree of Financial Leverage = 2.50
At 35,000 bags:
Operating Profit = Contribution Margin - Fixed Costs
Operating Profit = $175,000 - $95,000
Operating Profit = $80,000
Taxable Income = Operating Profit - Interest Expense
Taxable Income = $80,000 - $12,000
Taxable Income = $68,000
Degree of Financial Leverage = Operating Profit / Taxable
Income
Degree of Financial Leverage = $80,000 / $68,000
Degree of Financial Leverage = 1.18
Answer e.
At 23,000 bags:
Degree of Combined Leverage = Degree of Operating Leverage *
Degree of Financial Leverage
Degree of Combined Leverage = 5.75 * 2.50
Degree of Combined Leverage = 14.38
At 35,000 bags:
Degree of Combined Leverage = Degree of Operating Leverage *
Degree of Financial Leverage
Degree of Combined Leverage = 2.19 * 1.18
Degree of Combined Leverage = 2.58
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The...
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $95,000, while the variable costs of grapes are $.10 per pound a. What is the break-even point in bags? Break-even bags nt b. Calculate the profit or loss (EBIT) on 15,000 bags and on 35,000 bags. Bags Profit/Loss Amount 15,000 35,000 c. What is the degree of operating leverage at 23,000 bags and at 35,000 bags? (Round your...
Healthy Foods Inc. sells 50-pound bags of grapes to the military
for $10 a bag. The fixed costs of this operation are $90,000, while
the variable costs of grapes are $0.10 per pound.
answer to 2 dec Break-even point bags b. Calculate the profit or loss (EBIT) on 10,000 bags and on 35,000 bags. Profit/Loss Amount Bags 10,000 35,000 c. What is the degree of operating leverage at 24,000 bags and at 35,000 bags? (Round your answers to 2 decimal...
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of grapes are $0.10 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) Break-even point 16,000.00 bags b. Calculate the profit or loss (EBIT) on 13,000 bags and on 35,000 bags. Profit/Loss Amount Bags 13,000 35,000 c. What is the degree of operating leverage at...
Healthy Foods Inc. sells 60-pound bags of grapes to the military for $15 a bag. The fixed costs of this operation are $90,000, while the varlable costs of grapes are $0.15 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) bags Break-even point b. Calculate the profit or loss (EBIT) on 14.000 bags and on 35,000 bags Bags Profit/Loss Amount 14,000 35,000 c. What is the degree of operating leverage at 21,000...
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $20 a bag. The fixed costs of this operation are $110,000, while the variable costs of grapes are $0.20 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) Break-even point bags b. Calculate the profit or loss (EBIT) on 10,000 bags and on 20,000 bags. Profit/Loss Amount Bags 10,000 20,000 c. What is the degree of operating leverage at 18,000...
Healthy Foods Inc. sells 40-pound bags of grapes to the military for $15 a bag. The fixed costs of this operation are $105,000, while the variable costs of grapes are $0.20 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) b. Calculate the profit or loss (EBIT) on 14,000 bags and on 40,000 bags. c. What is the degree of operating leverage at 28,000 bags and at 40,000 bags? (Round...
Healthy Foods Inc. sells 60-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $60,000, while the variable costs of grapes are $0.10 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) b. Calculate the profit or loss (EBIT) on 13,000 bags and on 41,000 bags. c. What is the degree of operating leverage at 24,000 bags and at 41,000 bags? (Round...
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of grapes are $0.10 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) b. Calculate the profit or loss (EBIT) on 13,000 bags and on 35,000 bags.
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of grapes are $0.10 per pound. 1. a. What is the break-even point in bags? b. Calculate the profit or loss on 12,000 bags and on 25,000 bags.
Item 5 10 points 93 Item 5 Item 5 10 points Problem 5-12 Break-even point and degree of leverage [LO5-2, 5-5] Healthy Foods Inc. sells 60-pound bags of grapes to the military for $20 a bag. The fixed costs of this operation are $87,000, while the variable costs of grapes are $0.20 per pound. a. What is the break-even point in bags? (Round your answer to 2 decimal places.) b. Calculate the profit or loss (EBIT) on 9,000 bags and...