Healthy Foods, Inc., sells 50-pound bags of grapes to themilitary for $10 a bag.

The fixed costs of this operation are $80,000, while thevariable costs of the

grapes are $.10 per pound.

a. What is the break-even point in bags?

b. Calculate the profit or loss on 12,000 bags and on25,000 bags.

c. What is the degree of operating leverage at 20,000bags and at 25,000 bags?

Why does the degree of operating leverage change as the quantitysold

increases?

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 bothsales levels?