Woodland Wearables produces two models of a smart watch, the Basic and the Flash. The watches have the following characteristics: Basic Flash Selling price per watch $ 450 $ 550 Variable cost per watch $ 370 $ 310 Expected sales (watches) per year 75,000 25,000 The total fixed costs per year for the company are $1,632,000. Required: What is the anticipated level of profits for the expected sales volumes? Assuming that the product mix is the same at the break-even point, compute the break-even point in units. If the product sales mix were to change to nine Basic watches for each Flash watch, what would be the new break-even volume for Woodland Wearables?
Woodland Wearables produces two models of a smart watch, the Basic and the Flash. The watches have the following characteristics: Basic Flash Selling price per watch $ 450 $ 550 Variable cost per watch $ 370 $ 310 Expected sales (watches) per year 75,000 25,000 The total fixed costs per year for the company are $1,632,000. Required: What is the anticipated level of profits for the expected sales volumes? Assuming that the product mix is the same at the break-even point, compute the break-even point in units. If the product sales mix were to change to nine Basic watches for each Flash watch, what would be the new break-even volume for Woodland Wearables?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Woodland Wearables produces two models of a smart watch, the Basic and the Flash. The watches have the following characteristics:
| Basic | Flash | |
|---|---|---|
| Selling price per watch | $ 450 | $ 550 |
| Variable cost per watch | $ 370 | $ 310 |
| Expected sales (watches) per year | 75,000 | 25,000 |
The total fixed costs per year for the company are $1,632,000.
Required:
- What is the anticipated level of profits for the expected sales volumes?
- Assuming that the product mix is the same at the break-even point, compute the break-even point in units.
- If the product sales mix were to change to nine Basic watches for each Flash watch, what would be the new break-even volume for Woodland Wearables?
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