BREAK-EVEN ANALYSIS The Weaver Watch Company sells watches for $25, 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 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 $31? What is the significance of this analysis?
d. What would happen to the break-even point if the selling price was raised to $31 but variable costs rose to $23 a unit?