Question

Healthy Foods Inc. sells 40-pound bags of grapes to the military for $15 a bag. The fixed costs of this operation are $91,000, while the variable costs of grapes are $.20 per pound.

a. What is the break-even point in bags? (Round your answer to 2 decimal places.)

Break-even point: bags

Answer 1

The break-even point for Healthy Foods Inc. is 13,000 bags of grapes, at which point the total revenue from sales will equal the total costs, including both fixed costs and variable costs.

Step-by-step explanation:

To calculate the break-even point in bags for Healthy Foods Inc., we need to determine the point at which total revenue equals total costs (both fixed and variable). The company sells 40-pound bags of grapes for $15 each and has fixed costs of $91,000. The variable cost is $0.20 per pound, which makes it $0.20 x 40 pounds = $8 per bag.

To find the break-even point, we use the following formula:

Break-even point in bags = Fixed Costs / (Selling Price per bag - Variable Cost per bag)

Break-even point in bags = $91,000 / ($15 - $8)

Break-even point in bags = $91,000 / $7 per bag

Break-even point in bags = 13,000 bags

Therefore, Healthy Foods Inc. needs to sell 13,000 bags of grapes to break even.