Question

eBook The Warren Watch Company sells watches for $25, fixed costs are $145,000, and variable costs are $13 per watch. What is the firm's gain or loss at sales of 6,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent. $   What is the firm's gain or loss at sales of 16,000 watches? Loss, if any, should be indicated by a minus sign. 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 $35? -Select- (The result is that the break-even point is lower. ,The result is that the break-even point is higher. , The result is that the break-even point remains unchanged.) What would happen to the break-even point if the selling price was raised to $35 but variable costs rose to $20 a unit? Round your answer to the nearest whole number. -Select- (The result is that the break-even point increases. , The result is that the break-even point decreases. , The result is that the break-even point remains unchanged.)

Answer 1

a.
Calculation of firm's gain or loss on sale of 6,000 watches
Sales revenue	$150,000	6000*25
Variable costs	$78,000	6000*13
Contribution margin	$72,000
Fixed costs	$145,000
Loss on sale	-$73,000
b.
Sales revenue	$400,000	16000*25
Variable costs	$208,000	16000*13
Contribution margin	$192,000
Fixed costs	$145,000
Gain on sale	$47,000
c.
Calculation of break-even point in unit sales
Break-even point	Fixed costs/Contribution margin per unit
Break-even point	145000/(25-13)
Break-even point	12083
d.
Calculation of break-even point in unit sales
Break-even point	Fixed costs/Contribution margin per unit
Break-even point	145000/(35-13)
Break-even point	6591
The increase in sale price would lead to decrease in break-even point in unit sales
e.
Calculation of break-even point in unit sales
Break-even point	Fixed costs/Contribution margin per unit
Break-even point	145000/(35-20)
Break-even point	9667
The increase in sale price and variable price would lead to decrease in break-even point in unit sales