Chapter 2: 12BP_b (page 147)

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.

Short Answer

Expert verified

A loss of $20,000 is incurred by the company on selling 12,000 bags, whereas, a profit of $45,000 is earned by the company on selling 25,000 bags.

Step by step solution

Profit or loss on 12,000 bags

$\begin{array}{rcl} Profit / (Loss) & = & (Quantity \times (Price per unit - Variable cost per unit)) - Fixed cost \\ = & (12, 000 \times ($ 10 - $ 5)) - $ 80, 000 \\ = & ($ 20, 000) \end{array}$

Profit or loss on 25,000 bags

$\begin{array}{rcl} Profit / (Loss) & = & (Quantity \times (Price per unit - Variable cost per unit)) - Fixed cost \\ = & (25, 000 \times ($ 10 - $ 5)) - $ 80, 000 \\ = & $ 45, 000 \end{array}$

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Indicate whether item is on Balance sheet (BS) or Income statement (IS)	If on Balance sheet, designate which category	Item
		Accounts receivable
		Retained earnings
		Income tax expense
		Accrued expense
		Cash
		Selling and administrative expenses
		Plant and equipment
		Operating expenses
		Marketable securities
		Interest expense
		Sales
		Notes payable (6 month)
		Bonds payable, maturity 2019
		Common stock
		Depreciation expense
		Inventories
		Capital in excess of par value
		Net income (earning after tax)
		Income tax payable

Times mirror and glass company
Sales	\(126,000
Less: Cost of goods sold	93,000
Gross profit	\)33,000
Less: selling and administrative expenses	11,000
Lease Expenses	4,000
Operating profit*	\(18,000
Less: Interest expenses	3,000
Earning before taxes	\)15,000
Less: Taxes (30%)	4,500
Earning after taxes	$10,500

	20X1	20X2
Sales	\(3,230,000	\)3,370,000
Cost of goods sold	2,130,000	2,850,000
Gross profits	\(1,100,000	\)520,000
Selling and administrative expenses	298,000	227,000
Operating profits	\(802,000	\)293,000
Interest expense	47,200	51,600
Income before taxes	\(754,800	\)241,400
Taxes (35%)	264,180	84,490
Income after tax	\(490,620	\)156,910

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.

Short Answer

Step by step solution

Profit or loss on 12,000 bags

Profit or loss on 25,000 bags

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Recommended explanations on Business Studies Textbooks

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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.

Short Answer

Step by step solution

Profit or loss on 12,000 bags

Profit or loss on 25,000 bags

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Influences On Business

Business Operations

Operational Management

Business Development

Nature of Business

Business Case Studies

Study anywhere. Anytime. Across all devices.

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.