BREAK-EVEN ANALYSIS The Warren Watch Company sells watches for $26, fixed costs are $155,000, and variable costs are $13 per watch. a. What is the firm's gain or loss at sales of 9,000 watches? At 15,000 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 $33? What is the significance of this analysis? d. What would happen to the break-even point if the selling price was raised to $33 but variable costs rose to $24 a unit?
Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
Solutions
BREAK-EVEN ANALYSIS The Warren Watch Company sells watches for $26, fixed costs are $155,000, and variable costs are $13 per watch.
- a. What is the firm's gain or loss at sales of 9,000 watches? At 15,000 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 $33? What is the significance of this analysis?
- d. What would happen to the break-even point if the selling price was raised to $33 but variable costs rose to $24 a unit?
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