BREAK-EVEN ANALYSIS
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?