Question

Mo’s Delicious Burgers Inc. sells food to university cafeterias for $45 a box. The fixed costs of this operation are $258,000, while the variable cost per box is $25.

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 12,000 boxes and 24,000 boxes. (Do not round intermediate calculations. Input all answers as positive values.)

Boxes	Profit/Loss	Amount
12,000	(Click to select)  Loss  Profit	$
24,000	(Click to select)  Profit  Loss	$

c-1. What is the DOL at 16,800 boxes and 27,000 boxes? (Round the final answers to 2 decimal places.)

Boxes	DOL
16,800	X
27,000	X

c-2. Not available in Connect.

d. If the firm has an annual interest payment of $11,500, calculate the DFL at both 16,800 and 27,000 boxes. (Round the final answers to 2 decimal places.)

Boxes	DFL
16,800	X
27,000	X

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

Boxes	DCL
16,800	X
27,000	X

Answer 1

a.

Break Even point = Fixed costs/ Contribution per unit

= 258000/(45-25)

= 258000 / 20

= 12900 boxes

* contribution = selling price - Variable cost

b.

Particulars	Boxes 12000	Boxes 24000
Selling price	45	45
Variable cost	25	25
Contribution	20	20
No of boxes	12000	24000
	240000	480000
Fixed Cost	258000	258000
Profit/Loss	-18000	222000

c

Particulars	Boxes 16800	Boxes 27000
Selling price	45	45
Variable cost	25	25
Contribution	20	20
No of boxes	16800	27000
Contribution margin (1)	336000	540000
Fixed Cost	258000	258000
Operating profit (2)	78000	282000
DOL (1/2)	4.31	1.91

d

Particulars	Boxes 16800	Boxes 27000
Selling price	45	45
Variable cost	25	25
Contribution	20	20
No of boxes	16800	27000
Contribution margin (1)	336000	540000
Fixed Cost	258000	258000
EBIT (1)	78000	282000
Interest	10600	10600
EBT (2)	67400	271400
DFL (1/2)	1.16	1.04

e

Particulars	Boxes 16800	Boxes 27000
DOL (1)	4.31	1.91
DFL (2)	1.16	1.04
DCL (1*2)	4.99	1.99

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