Question

Mo’s Delicious Burgers Inc. sells food to university cafeterias for $41 a box. The fixed costs of this operation are $228,600, while the variable cost per box is $23.

a. What is the break-even point in boxes? (Do not round intermediate calculations.)

Break-even point             boxes

b. Calculate the profit or loss on 14,000 boxes and 28,000 boxes. (Do not round intermediate calculations. Input all answers as positive values.)

Boxes	Profit/Loss	Amount
14,000	(Click to select)  Profit  Loss	$
28,000	(Click to select)  Loss  Profit	$

c-1. What is the DOL at 19,600 boxes and 29,000 boxes? (Round the final answers to 2 decimal places.)

Boxes	DOL
19,600	X
29,000	X

c-2. Not available in Connect.

d. If the firm has an annual interest payment of $11,300, calculate the DFL at both 19,600 and 29,000 boxes. (Round the final answers to 2 decimal places.)

Boxes	DFL
19,600	X
29,000	X

e. What is the DCL at both sales levels? (Round the final answers to 2 decimal places.)

Boxes	DCL
19,600	X
29,000	X

Answer 1

a. Break Even point = Fixed costs/ Contribution per unit

= 228600/(41-26)

= 228600 / 18

= 12700 boxes

* contribution = selling price - Variable cost

b.

Particulars	Boxes 14000	Boxes 28000
Selling price	41	41
Variable cost	23	23
Contribution	18	18
No of boxes	14000	28000
	252000	504000
Fixed Cost	228600	228600
Profit	23400	275400

C

DOL = contribution margin/operating income

Particulars	Boxes 19600	Boxes 29000
Selling price	41	41
Variable cost	23	23
Contribution	18	18
No of boxes	19600	29000
Contribution margin (1)	352800	522000
Fixed Cost	228600	228600
Operating profit (2)	124200	293400
DOL (1/2)	2.84	1.78

d. DFL= EBIT / EBT

Particulars	Boxes 19600	Boxes 29000
Selling price	41	41
Variable cost	23	23
Contribution	18	18
No of boxes	19600	29000
Contribution margin	352800	522000
Fixed Cost	228600	228600
EBIT (1)	124200	293400
Interest	11300	11300
EBT (2)	112900	282100
DFL (1/2)	1.10	1.04

e. DCL = Degree of Operating liverage * Degree of Finanacial leverage

Particulars	Boxes 19600	Boxes 29000
DOL (1)	2.84	1.78
DFL (2)	1.10	1.04
DCL (1*2)	3.12	1.85

Pls do rate, if the answer is correct and comment, if any further assistance is required.