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Unformatted text preview: Less Variable costs ($.10 x 50 x 25,000) = $125,000 Contribution Margin = $125,000 Less fixed costs = $80,000 NET PROFIT = $45,000 c. What is the degree of operating leverage at 20,000 bags and at 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases? Leverage decreases because the BEP is farther away. The firm has a higher profit so leverage is reduced. d. If Healthy Foods has an annual interest expense of $10,000, calculate the degree of financial leverage at both 20,000 and 25,000 bags. e. What is the degree of combined leverage at both sales levels?...
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This note was uploaded on 10/30/2010 for the course FIN 320 ASDFI taught by Professor Asdf during the Spring '09 term at University of Phoenix.
- Spring '09