Question

The Warren Watch Company sells watches for $28, fixed costs are $195,000, and variable costs are $15 per watch.

1. What is the firm's gain or loss at sales of 9,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.
   $  
   
   What is the firm's gain or loss at sales of 18,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.
   $  
2. 
   
3. What is the break-even point (unit sales)? Round your answer to the nearest whole number.
   units
4. 
   
5. What would happen to the break-even point if the selling price was raised to $32?
   -Select-The result is that the break-even point is lower.             The result is that the break-even point is higher.             The result is that the break-even point remains unchanged.             Item 4
6. 
   
7. What would happen to the break-even point if the selling price was raised to $32 but variable costs rose to $28 a unit? Round your answer to the nearest whole number.
   -Select-The result is that the break-even point increases.             The result is that the break-even point decreases.             The result is that the break-even point remains unchanged.            

Answer 1

Answer:-

a. Firms Gain or Loss on 9000 watches
Particulars		Amount (in $)
Selling Price	=	252000
Less :-
Variable Cost	=	135000
Contribution	=	117000
Less:-
Fixed Cost	=	195000
Loss	=	-78000
b. Firms Gain or Loss on 18000 watches
Particulars		Amount (in $)
Selling Price	=	504000
Less :-
Variable Cost	=	270000
Contribution	=	234000
Less:-
Fixed Cost	=	195000
Profit	=	39000
c. Break even point
Particulars		Amount (in $)
Fixed Cost	=	195000
Selling price per unit (a)	=	28
Variable Cost per unit (b)	=	15
Contribution per unit (a)/(b)	=	13
Break Even Point	=	Fixed Cost / Contribution per unit
Break Even Point	=	15000
d. Break even point when sale price was raised to $ 32
Particulars		Amount (in $)
Fixed Cost	=	195000
Selling price per unit (a)	=	32
Variable Cost per unit (b)	=	15
Contribution per unit (a)/(b)	=	17
Break Even Point	=	Fixed Cost / Contribution per unit
Break Even Point	=	11471
e. Break even point when sale price was raised to $ 32 but variable cost rose to $28 per unit
Particulars		Amount (in $)
Fixed Cost	=	195000
Selling price per unit (a)	=	32
Variable Cost per unit (b)	=	28
Contribution per unit (a)/(b)	=	4
Break Even Point	=	Fixed Cost / Contribution per unit
Break Even Point	=	48750