Instructions

Answer the questions based on the following information. A watch dealer incurs an expense of Rs. 150 for producing every watch. He also incurs an additional expenditure of Rs. 30,000, which is independent of the number of watches produced If he is able to sell a watch during the season, he sells it for Rs. 250. If he fails to do so, he has to sell each watch for Rs. 100.

Question 21

If he produces 1,500 watches, what is the number of watches that he must sell during the season in order to break-even, given that he is able to sell all the watches produced?

Solution

Break even implies that cost price is equal to selling price
Hence let's say in season x watches were sold
Cost price will be = $$1500 \times 150 + 30000 = 255000$$
So total selling price = $$250x + (1500 -x) 100 = 255000 $$
Or $$x = 700$$

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If he produces 1,500 watches, what is the number of watches that he must sell during the season in order to break-even, given that he is able to sell all the watches produced?

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