Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.39 per unit, and the variable labor cost is $2.64 per unit.

a. What is the variable cost per unit?

b. Suppose the company incurs fixed costs of $600,000 during a year in which total production is 300,000 units. What are the total costs for the year?

c. If the selling price is $11.95 per unit, what is the NSI break-even on a cash basis?

d. If depreciation is $180,000 per year, what is the accounting break-even point? This is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.Next Visit question mapQuestion 10 of 10 Total 10 of 10 Prev

Answer 1

a) Variable cost per unit = Material cost + Labour cost = 1.39 + 2.64 = 4.03

b) Fixed Costs = 600000

Total Cost = Variable Cost * Units + Fixed Costs = 4.03*300000 + 600000 = 1,809,000

c) Break Even point Means the amount of sales at which there is no profit no loss. Break-even point can be defined as a point where total costs (expenses) and total sales (revenue) are equal.

Break Even Point = Fixed Costs/ (Selling Price - Varible Cost) = 600000 / (11.95- 4.03)= 75758 units

d) To find accounting break even sales, even depreciation is considered as fixed costs.

BEP = (Fixed Cost + Depreciation)  / (Selling Price - Varible Cost) = 780000 / (11.95- 4.03) = 98485 units.