Mary's Soap Shop is considering the production of soap bars made from goats milk. The company can use a large factory with a small number of workers, or a small factory with a large number of workers. Each soap bar has a sale price of $20. The cost of making a soap bar is $5 using the large factory, and $10 using the small factory, respectively. The large factory will have fixed costs of $1,000,000 and a depreciation expense of $500,000 per year, while the fixed costs and depreciation for the small factory are $250,000 and $50,000 per year, respectively.

a. What are the accounting operating profit break-even points for both factories? Interpret these results in no more than one sentence(4 Marks)

b. Is EBIT or EBITDA more sensitive to revenue changes? Why? Answer in no more than one sentence. (2 Marks)

c. What is the number of soap bars for Mary's Soap Shop for which the accounting operating profit is the same, regardless of the factory choice. (1 Mark)

d. What is the big factory's Accounting DOL if the EBIT is $2,000,000? Explain what this answer means in no more than one sentence. (3 Marks)

e. Describe what is meant by scenario analysis? Answer in one sentence only.(2 Marks)

If a firm uses a flexible current asset investment strategy what would be the impact on the balances of the following items. Answer with a or to symbolize an increase or decrease.(4 marks) Impact on Cash Balance, Accounts Receivable, Inventory Holding Costs, Inventory Shortage Costs