break even analysis
posted by marie on .
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?
10/50 * n=80000+.1n where n is number of pounds. n will have to be a multiple of 50 the way the bags are made.
n= 800,000 lbs.
what is the degree of operating leaverage at 20,000 bags and at 25,000 bags
The degree of operating leverage at 20,000 bags and at 25,000 bags
DOL = (Quantity x (Selling Price - Variable Cost))/((Quantity x (Selling Price - Variable Cost))- Fixed Cost)
DOL (20,000) = (20,000*(10-5))/(((20,000*(10-5))-80,000) = 5 times
DOL (25,000) = (25,000*(10-5))/(((25,000*(10-5))-80,000) = 2.78 times