Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $15.90 per unit, and the variable labor cost is $6.90 per unit. a. What is the variable cost per unit? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Variable cost $ b. Suppose NSI incurs fixed costs of $780,000 during a year in which total production is 340,000 units. What are the total costs for the year? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) Total cost $ c. If the selling price is $47.50 per unit, what is the cash break-even point? If depreciation is $580,000 per year, what is the accounting break-even point? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Cash break-even point units Accounting break-even point units

Explanation / Answer

a)

Variable cost per unit = Variable material cost per unit+Variable Labor cost per unit = $15.90+$6.90 = $22.80.

b)

Total production = 340,000 units.

Total variable cost = Total production * variable cost per unit = 340,000*22.80 =$7,752,000.

Add: Fixed Costs = $780,000.

Total costs = variable cost + Fixed cost = $7752000+780000 = $8,532,000.

c)

Cash Break-even point = Fixed cost / (sale price per unit - variable cost per unit)

= $780000/(47.50-22.80) = 31578.95 units

Cash Break-even point in Dollars = 31578.95*47.50 = 1500000.

d)

Accounting breakeven point = (Fixed cost + Depreciation)/(Sale price per unit - variable cost per unit)

=(780000+580000)/(47.5-22.8)

= 55060.73 units.

Accounting breakeven point in dollars = 55060.73*47.5 = 2,615,385.

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