Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $15.80 per unit, and the variable labor cost is $6.50 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 $700,000 during a year in which total production is 300,000 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 $45.50 per unit, what is the cash break-even point? If depreciation is $500,000 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

Answer 1

a.

Variable cost per unit = Material cost per unit + Variable labor cost per unit                            

Variable cost per unit = 15.80+6.50                       

Variable cost per unit = $22.30

b.                        

Total costs = Variable costs + Fixed costs                            

Total costs = Variable cost per unit x Total Production units + Fixed costs                             

Total costs = 22.30 x 300000 + 700000                 

Total costs = $7,390,000             

             

c.          

                            

Accounting break-even = (Fixed Costs + Depreciation) /(Selling price per unit - Variable cost per unit)                 

Accounting break-even = (700000+500000) /(45.5 - 22.30)                         

Accounting break-even = 51724.14 Units

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Accounting break-even in USD = Selling price x (Fixed Costs + Depreciation) /(Selling price per unit - Variable cost per unit)

Accounting break-even in USD = 45.50 x (700000+500000) /(45.5 - 22.30)

Accounting break-even in USD = $2,353,448.28

Cash break-even = Fixed Costs /(Selling price per unit - Variable cost per unit)                            

Cash break-even = 700000 /(45.50 - 22.30)                        

Cash break-even = 30172.41 Units