CheckPoint Break-Even Analysis

# CheckPoint - 125,000/45,000=2.777777777778=2.8 Why does the degree of operating leverage change as the quantity sold increases The degree of

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Running head: CHECKPOINT: BREAK-EVEN ANALYSIS 1 CheckPoint: Break-Even Analysis Holly Sestito FIN/200 May 27, 2011 Noah Plante

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CHECKPOINT: BREAK-EVEN ANALYSIS 2 CheckPoint: Break-Even Analysis 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? 50*.10=5 80,00/5=16,000 b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. 12,000*10=120,000 12,000*5=60,000 120,000-80,000=40,000 60,000-80,000=(20,000) 25,000*10=250,000 25,000*5=125,000 250,000-80,00=170,000 125,000-80,000=45,000 c. What is the degree of operating leverage at 20,000 bags and at 25,000 bags? 100,000/20,000=5
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Unformatted text preview: 125,000/45,000=2.777777777778=2.8 Why does the degree of operating leverage change as the quantity sold increases? The degree of leverage will change with the increase of sale because the more purchased the higher the profit will be. 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. 20000(5-.10)=98,000 20000(5-.10)=98,000-10,000=88,000 98,000/88,000=1.1 45000(5-.10)=220,500 45000(5-.10)=220,500-10,000=210,500 220,500/210,500=1.04 CHECKPOINT: BREAK-EVEN ANALYSIS 3 e. What is the degree of combined leverage at both sales levels? 100,000/(20,000-10,000)=100,000/10,000=10 125,000/(45,000-10,000)=125,000/35,000=3.57...
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## This note was uploaded on 06/19/2011 for the course FIN 200 200 taught by Professor Markempasis during the Spring '09 term at University of Phoenix.

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CheckPoint - 125,000/45,000=2.777777777778=2.8 Why does the degree of operating leverage change as the quantity sold increases The degree of

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