BREAK-EVEN ANALYSIS The Warren Watch Company sells watches for $24, fixed costs
ID: 2792162 • Letter: B
Question
BREAK-EVEN ANALYSIS
The Warren Watch Company sells watches for $24, fixed costs are $165,000, and variable costs are $10 per watch.
A.) What is the firm's gain or loss at sales of 10,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent.
$
B.) What is the firm's gain or loss at sales of 20,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent.
$
What is the break-even point (unit sales)? Round your answer to the nearest whole number. units What would happen to the break-even point if the selling price was raised to $34?
What would happen to the break-even point if the selling price was raised to $34 but variable costs rose to $20 a unit? Round your answer to the nearest whole number.
Explanation / Answer
A) gain = 10,000*(24 - 10) - 165,000 = -25,000
loss = 25,000
B) gain = 20,000*(24 - 10) - 165,000 = 115,000
c) i) break even point = 165,000/14 = 11,786
ii) break even point = 165,000/(34-10) = 6875
iii) break even point = 165,000/(34 - 20) = 11,786
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