Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $12.50 per unit, and the variable labor cost is $7.20 per unit.

  

a.	What is the variable cost per unit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	Suppose the company incurs fixed costs of $840,000 during a year in which total production is 370,000 units. What are the total costs for the year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c.	If the selling price is $49.00 per unit, what is the cash break-even point? If depreciation is $640,000 per year, what is the accounting break-even point? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

  

Answer 1

a. Variable cost per unit = Variable materials cost + Variable labor cost = $12.50 + $7.20 = $19.70 per unit

b. Total costs = Variable costs + Fixed costs

Total costs = (370,000 * $19.70) + $840,000

Total costs = $8,129,000

c. Cash break even = Fixed costs / (Selling price - Variable cost per unit)

Cash break even = $840,000 / ($49.00 - $19.70)

Cash break even = 28,668.94 units

Accounting breakeven = (Fixed costs + Depreciation) / (Selling price - Variable cost per unit)

Accounting breakeven = ($840,000 + $640,000) / ($49.00 - $19.70)

Accounting breakeven = 50,511.95 units