Item36

Item 36

Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $90,000, while the variable costs of grapes are $0.10 per pound.

a. What is the break-even point in bags? (Round your answer to 2 decimal places.)

b. Calculate the profit or loss (EBIT) on 10,000 bags and on 35,000 bags.

c. What is the degree of operating leverage at 24,000 bags and at 35,000 bags? (Round your answers to 2 decimal places.)

d. If Healthy Foods has an annual interest expense of $15,000, calculate the degree of financial leverage at both 24,000 and 35,000 bags. (Round your answers to 2 decimal places.)

e. What is the degree of combined leverage at both 24,000 and 35,000 bags? (Round your answers to 2 decimal places.)