The Weaver Watch Company manufactures a line of ladies’ watches that is sold through discount houses. Each watch is sold for $25; the fixed costs are $140,000 for 30,000 watches or less; variable costs are $15 per watch.
a. What is the firm’s gain or loss at sales of 8,000 watches? Of 18,000 watches?
b. What is the breakeven point? Illustrate your answer with a graph.
c. What is Weaver’s DOL at sales of 8,000 units? Of 18,000 units?
d. What happens to the operating breakeven point if the selling price rises to $31? What is the significance of the change to the financial manager?
e. What happens to the breakeven point if the selling price rises to $31 but variable costs increase to $23 per unit?

  • CreatedNovember 24, 2014
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