Question

The Warren Watch Company sells watches for $24, fixed costs are $120,000, and variable costs are $14 per watch.

What is the firm's gain or loss at sales of 10,000 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 15,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.
$

What is the break-even point (unit sales)? Round your answer to the nearest whole number.
units

What would happen to the break-even point if the selling price was raised to $34?

What would happen to the break-even point if the selling price was raised to $34 but variable costs rose to $28 a unit? Round your answer to the nearest whole number.

Answer 1

1. - $ 20,000.00

2. $ 30,000.00

3. 12,000 Units

4. 6,000 Units

5. 20,000 Units

Notes:

1	Selling Price	24.00
	Less: Variable Cost	14.00
	Contribution Margin	10.00
	Total Contribution Margin (Contribution Margin * Units)	1,00,000.00
	Less: Fixed Cost	1,20,000.00
	Profit / Loss	-20,000.00

2
	Selling Price	24.00
	Less: Variable Cost	14.00
	Contribution Margin	10.00
	Total Contribution Margin (Contribution Margin * Units)	1,50,000.00
	Less: Fixed Cost	1,20,000.00
	Profit / Loss	30,000.00

3. Break Even Point (Units Sales) = Fixed Cost / Contribution Margin per Unit

= $ 120000/$ (24-14)

= 12,000 Units

4.

Break Even Point (Units Sales) = Fixed Cost / Contribution Margin per Unit

= $ 120000/$ (34-14)

= 6,000 Units

5.

Break Even Point (Units Sales) = Fixed Cost / Contribution Margin per Unit

= $ 120000/$ (34-28)

= 20,000 Units