Problem:
The Weaver Watch Co sells watches for $25, the fixed costs are $140,000, variable costs are $15 per watch.
Required:
Question 1: What is firm's gain or loss at sales of 8000 watches? At 18000?
Question 2: What is break even point?
Question 3: What would happen to break even point is selling price raised to $31.00? What is the significance of this analysis?
Question 4: What would happen to break even point if selling price raised to $31.00 but variable costs rose to $23 a unit?
Note: Provide support for your underlying principle.