a)Gain/(loss) on sale of 5000 watches : number of watches sold [price -variable cost ] -Fixed cost
= 5000 [26-11] - 130000
=[5000*15] - 130000
= 75000 - 130000
= - 55000
Gain/(loss) on sale of 20000 watches : number of watches sold [price -variable cost ] -Fixed cost
= 20000 [26-11] - 130000
= [20000*15] - 130000
= 300000 - 130000
= 170000
b)
Breakeven point =Fixed cost /(price -variable cost)
= 130000/(26-11)
= 130000/ 15
= 8667 watches
c)Correct option is "a"
with increase in selling price ,Break even points gets decreased (lower)
Breakeven point =Fixed cost /(price -variable cost)
= 130000/(35-11)
= 130000/ 24
= 5417 watches
d)correct option is "b"-Breakeven point will be higher .
Breakeven point =Fixed cost /(price -variable cost)
= 130000/(35-25)
= 130000/ 10
= 13000 watches
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