Question

The Warren Watch Company sells watches for $30, fixed costs are $155,000, and variable costs are $13 per watch. a. What is the firm's gain or loss at sales of 6,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent. What is the firm's gain or loss at sales of 18,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent. b. What is the break-even point (unit sales)? Round your answer to the nearest whole number. units c. What would happen to the break-even point if the selling price was raised to $33? -Select- d. What would happen to the break-even point if the selling price was raised to $33 but variable costs rose to $21 a unit? Round your answer to the nearest whole number. -Select-

Answer 1

Part A:

If 6000 Watches sold:

Particulars	Amount	Calculation
Sales	$ 1,80,000.00	6000*30
( -) Variable Cost	$    78,000.00	6000*13
( - ) Fixed Cost	$ 1,50,000.00	Given
profit	$ -48,000.00	Sales - VC- FC

If 18000 Watches sold:

Particulars	Amount	Calculation
Sales	$ 5,40,000.00	18000*30
( -) Variable Cost	$ 2,34,000.00	18000*13
( - ) Fixed Cost	$ 1,50,000.00	Given
profit	$ 1,56,000.00	Sales - VC- FC

Part B:

Break Even Point = Fixed Cost / [ SP per Unit - VC per unit ]

= 155000 / [ 30 - 13 ]

= 155000 / 17

= 9118 units

Part C:

Break Even Point = Fixed Cost / [ SP per Unit - VC per unit ]

= 155000 / [ 33 - 13 ]

= 155000 / 20

= 7750 units

Part D:

Break Even Point = Fixed Cost / [ SP per Unit - VC per unit ]

= 155000 / [ 33 - 21 ]

= 155000 / 12

= 12917 units