FIN 200
Axia College of University of Phoenix (UoP)
Introduction to Finance: Harvesting the Money Tree
Finance 200 Assignment Workbook Week 4 Solution
Week 4 Checkpoint: Breakeven Analysis
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A business unit of The Niara Coporation sells beans to the military. The following is the associated financial data:
Quantity (Q) 25 lb
Sales Price (P) $ 8 per bag
Fixed Costs (FC) $ 75,000
Variable Costs (VC) $ 0.07 per pound
Interest Expense (I) $ 8,000
a . What is the break‐even point in bags?
b . Calculate the profit or loss on:
7,500 bags
15,000 bags
c. Calculate the degree of operating leverage at:
15,000 bags
24,000 bags
Why does the degree of operating leverage change as the quantity sold increases?
d. Calculate the degree of financial leverage at both sales levels in question c.
e. What is the degree of combined leverage at both sales levels in question c?
You must show your work to receive credit.
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