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?

4 answers

Profit=costs
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.

.2n-.1n=80000
n= 800,000 lbs.
16,000 bags
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