The Weaver Watch Company sells watches for $25, the fixed costs are $140,000, an

ID: 2632875 • Letter: T

Question

The Weaver Watch Company sells watches for $25, the fixed costs are $140,000, and variable costs are $15 per watch.

a. What is the firm's gain or loss at sales of 8,000 watches? At 18,000 watches?

b. What is the break-even point? Illustrate by means of a chart.

c. What would happen to the break-even point if the selling price was raised to $31? Whatis the significance of this analysis?

d. What would happen to the break-even point if the selling price was raised to $31 butvariable costs rose to $23 a unit?

Explanation / Answer

Loss=8000*(25-15)-140000 -60000 Profit=18000*(25-15)-140000 40000 Breakeven Point=Fixed Cost/Contribution=140000/(25-15) 14000 Breakeven Point when selling price is 31=Fixed Cost/Contribution=140000/(31-15) 8750 Breakeven Point when selling price is 31 and cost price 23=Fixed Cost/Contribution=140000/(31-23) 17500

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The Weaver Watch Company sells watches for $25, the fixed costs are $140,000 and

The Weaver Watch Company sells watches for $25; the fixed costsare $140,000; and

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The Weaver Watch Company sells watches for $25, the fixed costs are $140,000, an

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