Break-Even Analysis- The Weaver Watch Company sells watches for $25, fixed costs
ID: 2718397 • Letter: B
Question
Break-Even Analysis- The Weaver Watch Company sells watches for $25, fixed costs are $140,000 and variables 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?
Explanation / Answer
Break Even Point = Fixed Cost / Contribution per unit
= 140000/(25-15) i.e 14000 units
2)
Break Even point = 140000/(31-15)
= 8750 units
Particulars Amount Amount Units 8000 18000 Sales 200000 450000 Less: Variable Costs 120000 270000 Contribution 80000 180000 Less: Fixed Costs 140000 140000 Profit -60000 40000