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 butvariable costs rose to $24 a unit?
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 butvariable costs rose to $24 a unit?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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