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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