Question

1.

United Snack Company sells 50-pound bags of peanuts to university dormitories for $38 a bag. The fixed costs of this operation are $390,000, while the variable costs of peanuts are $0.24 per pound.

a. What is the break-even point in bags?
  

b. Calculate the profit or loss (EBIT) on 6,000 bags and on 19,000 bags.
  

	Bags Degree of Financial Leverage 6,000 19,000

c. What is the degree of operating leverage at 18,000 bags and at 23,000 bags? (Round your answers to 2 decimal places.)
  

	Bags Degree of Financial Leverage 18,000 23,000

d. If United Snack Company has an annual interest expense of $24,000, calculate the degree of financial leverage at both 18,000 and 23,000 bags. (Round your answers to 2 decimal places.)

	Bags Degree of Financial Leverage 18,000 23,000

  

e. What is the degree of combined leverage at both a sales level of 18,000 bags and 23,000 bags? (Round your answers to 2 decimal places.)
  

	Bags Degree of Financial Leverage 18,000 23,000

Answer 1