Week 4 CheckPoint-Break-Even Analysis

Week 4 CheckPoint-Break-Even Analysis - 13 Healthy Foods...

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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? BE=80,000/10-(50*.10) BE=80,000/10-5 BE=80,000/5 BE=16,000 The break-even point is 16,000 bags b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. Having a profit margin of \$5 per bag the company would gain \$5 for every bag sold over the break-even point and would lose \$5 for anything less than the break-even point. The break-even point is 16,000 bags if we only sold 12,000 bags we sold 4,000 less and the company would lose \$5 per bag that we did not sell as this is the profit margin. Therefore, we multiply the difference of 16000(break-even point) and 12000 (actual sales) which is -4000 by 5 (the contribution margin) to figure the operating loss. -4000*5=20,000. The company would have a \$20,000 loss. We would do the same to calculate the gain

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Week 4 CheckPoint-Break-Even Analysis - 13 Healthy Foods...

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