Samantha Karp break even analysis

Samantha Karp break even analysis - Less Variable costs...

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Samantha Karp Break even analysis FIN 200 13. 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 the grapes are $.10 per pound. a. What is the break-even point in bags? Contribution Margin per bag = Revenue per bag - Variable cost per bag CM per bag = $10 - $5 =$5 B/E point in bags = Fixed costs/CM per bag = $80,000/5 = 16,000 bags b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. Revenue = 12,000 x $10 = $120,000 Less Variable cost ($.10 x 50 x 12,000) = $60,000 Contribution Margin $60,000 Less fixed costs $80,000 NET LOSS $20,000 Sales ($10x$25,000) = $250,000
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Unformatted text preview: Less Variable costs ($.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.

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Samantha Karp break even analysis - Less Variable costs...

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