Chapter 2: Financial Analysis and Planning
12BP_a
Healthy Foods Inc. sells 50-pound bags of grapes to the military for \(10 a bag. The fixed costs of this operation are \)80,000, while the variable costs of grapes are $0.10 per pound.
a. What is the break-even point in bags?
12BP_b
Healthy Foods Inc. sells 50-pound bags of grapes to the military for \(10 a bag. The fixed costs of this operation are \)80,000, while the variable costs of grapes are $0.10 per pound.
b. Calculate the profit or loss on 12,000 bags and on 25,000 bags.
12BP_c
Healthy Foods Inc. sells 50-pound bags of grapes to the military for \(10 a bag. The fixed costs of this operation are \)80,000, while the variable costs of grapes are $0.10 per pound.
c. What is the degree of operating leverage at 20,000 bags and at 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases?
12BP_d
Healthy Foods Inc. sells 50-pound bags of grapes to the military for \(10 a bag. The fixed costs of this operation are \)80,000, while the variable costs of grapes are \(0.10 per pound.
d. If Healthy Foods has an annual interest expense of \)10,000, calculate the degree of financial leverage at both 20,000 and 25,000 bags.
12BP_e
Healthy Foods Inc. sells 50-pound bags of grapes to the military for \(10 a bag. The fixed costs of this operation are \)80,000, while the variable costs of grapes are $0.10 per pound.
e. What is the degree of combined leverage at both sales levels?
13BP
Front Beam Lighting Company has the following ratios compared to its industry for last year:
| Industry | |
Return on assets | 12% | 5% |
Return on equity | 16% | 20% |
Explain why the return-on-equity ratio is so much less favorable than the return on-assets ratio compared to the industry. No numbers are necessary; a one- sentence answer is all that is required.
13BP
Classify the following balance sheet items as current or noncurrent:
Retained earning | Bond payable |
Accounts payable | Accrued wages payable |
Prepaid expenses | Accounts receivable |
Plant and equipment | Capital in excess of par |
Inventory | Preferred stock |
Common stock | Marketable security |
13 BP
Front Beam Lighting Company has the following ratios compared to its industry for last year:
Front Beam Lighting | Industry | |
Return on assets | 12% | 5% |
Return on equity | 16% | 20% |
Explain why the return-on-equity ratio is so much less favorable than the return on-assets ratio compared to the industry. No numbers are necessary; a one- sentence answer is all that is required.
13BP_a
At the end of January, Mineral Labs had an inventory of 775 units, which cost \(12 per unit to produce. During February, the company produced 900 units at a cost of \)16 per unit. If the firm sold 1,500 units in February, what was the cost of goods sold?
a. Assume LIFO inventory accounting.
13BP_a
United Snack Company sells 50-pound bags of peanuts to university dormitories for \(20 a bag. The fixed costs of this operation are \)176,250, while the variable costs of peanuts are $0.15 per pound.
a. What is the break-even point in bags?
