Question

The weaver watch company sells watches for $25; the fixed costs are $140,000; and variable costs are $15 per watch. what is the firm's gain or loss at sales of 8,000 watches?

Answer 1

Loss is of $60,000.

Given fixed cost of $140000, variable cost of $15 per watch and sales of 8000 watches.

Gain or loss is to be computed.

Simply put, a gain is a rise in the value of an item, whereas a loss is a loss of value. Gains and losses can be classified as realized or unrealized. When an investor sells an item, he or she makes a profit or a loss, unless the realized price is exactly what they paid.

The formula to compute the gain or loss is given below:

Gain or loss= Sales -variable cost+ contribution - fixed cost

                  =$200,000( 8,000*$25) - $120,000(8,000*$15                     +$80,000-$140,000

                  =-$60,000

Therefore, loss is of $60,000.

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