14-6 The Weaver Watch Co sells watches for $25-ANSWER KEY

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14-6

Breakeven Analysis

The Weaver Watch Co sells watches for $25, the fixed costs are $140,000, and variable 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 breakeven point? Illustrate by means of a chart.

c. What would happen to the breakeven point if the selling price was raised to $31? What is the significance of this analysis?

d. What would happen to the breakeven point if the selling price was raised to $31 but variable costs rose to $23 a unit?

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