Question

Day Vision Inc. produces sunglasses. The company uses $1.28 in materials and $2.3 in labor to construct each pair. Over the course of one year, Day Vision incurs fixed costs of $550,000. Day Vision anticipates producing 220,000 units this year.

   Requirement 1:What is the variable cost per unit?

(Do not round your intermediate calculations.) (Click to select)3.58 1.282.33.683.48  

Requirement 2:What are the anticipated total costs for the year? (Do not round your intermediate calculations.)

(Click to select)1,270,720 1,337,600 787,6001,404,4801,237,600

  Requirement 3:(a)If the selling price is $10.35 per unit, what is the Day Vision's break-even quantity on a cash basis? (Do not round your intermediate calculations.)

   (Click to select)82,241 units85,303 units77,179 units81,241 units103,988 units   

(b)If depreciation is $154,000 per year, what is the accounting break-even quantity? (Do not round your intermediate calculations.)

   (Click to select)81,241 units98,789 units109,187 units98,988 units103,988 units

Answer 1

1. Variable cost per unit = 1.28 + 2.3 = $3.58

2. Anticipated total costs for the year = TVC + TFC

                                                           = ($3.58 * 220,000) + 550,000

                                                          = $1,337,600

3. Day Vision's break-even quantity on a cash basis = FC / (Selling price per unit - VC per unit)

                                                                                  = 550,000 / (10.35 - 3.58)

                                                                                  = 82,241

b) Accounting break-even quantity = (FC + depreciation) / (Selling price per unit - VC per unit)

                                                                                  = (550,000 + 154,000) / (10.35 - 3.58)

                                                                                  = 103,988 units