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BREAK-EVEN ANALYSIS The Weaver Watch Company sells watches for $25, fixed costs are $140,000, and variable costs are $15 per watch. a. What is the firm’s gain or loss at sales of 8,000 watches? At 18,000 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 $31? What is the significance of this analysis? d. What would happen to the break-even point if the selling price was raised to $31 but variable costs rose to $23 a unit?

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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

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Chapter
Section
Chapter 14, Problem 6P
Textbook Problem

BREAK-EVEN ANALYSIS The Weaver Watch Company sells watches for $25, fixed costs are $140,000, and variable costs are $15 per watch.

  1. a. What is the firm’s gain or loss at sales of 8,000 watches? At 18,000 watches?
  2. b. What is the break-even point? Illustrate by means of a chart.
  3. c. What would happen to the break-even point if the selling price was raised to $31? What is the significance of this analysis?
  4. d. What would happen to the break-even point if the selling price was raised to $31 but variable costs rose to $23 a unit?

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