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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $15.70 per unit, and the variable labor cost is $6.10 per unit. a. What is the variable cost per unit? (Do not round in calculations. Round your answer to 2 decimal places, e.g., 32.16.) Variable cost b. Suppose NSI incurs fixed costs of $620,000 during a year in which total production is 260,000 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 $43.50 per unit, what is the cash break-even point? If depreciation is $420,000 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 Accounting break-even point units units

Explanation / Answer

Answer)

Total Variable cost per unit is the sum of two variable cost

a) Variable cost per unit = 15.7 + 6.1 = 21.8

b) The total costs include all variable costs and fixed costs. We need to make sure we are including allvariable costs for the number of units produced,so:

Total costs = Variable costs + Fixed costsT

Total costs = $21.8(260,000) + $620,000

Total costs = $6288000

c)

The cash breakeven, that is the point where cash flow is zero, is:

QC= $620,000 / ($43.50 – 21.8)

QC= 28571.43 units

And the accounting breakeven is:

QA= ($620,000 + 420,000) / ($43.50 – 21.8)

QA= 47926.27 units

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