Question

he Warren Watch Company sells watches for $24, fixed costs are $115,000, and variable costs are $15 per watch. What is the firm's gain or loss at sales of 5,000 watches

Answer 1

The firm has a loss of $70,000.

Step-by-step explanation:

To find the firm's gain or loss at sales of 5,000 watches you have to use the formula to calculate the net income:

Net income=sales-cost of goods sold

Sales=$24*5,000

Sales=$120.000

Cost of goods sold=$115,000+($15*5,000)

Cost of goods sold=$115,000+$75,000

Cost of goods sold=$190,000

Net income=$120,000-$190,000

Net income=-$70,000

According to this, the firm has a loss of $70,000.