Question

Lamps R Us makes lamps.  The variable materials cost $8.85 per unit.  The variable labor cost is $8.10 per unit.  (10 points)

1. what is variable cost per unit
2. suppose Lamps R Us has fixed costs of $800,000 during the year in which its total production is 150,000 units.  What are the total costs for the year?
3. If the selling price is $39.99 per unit.  Does Lamps R Us break even on a cash basis?  If depreciation is $400,000 per year, what is the accounting break-even point?

Answer 1

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Lamps R Us
Answer a	Amount $	Note
Variable materials cost	8.85
Variable labor cost	8.10
Variable cost per unit	16.95	A
Answer b	Amount $
Variable cost per unit	16.95	See A
Units produced	150,000.00	B
Total Variable cost	2,542,500.00	C=A*B
Add: Fixed costs	800,000.00	D
Total production cost	3,342,500.00
Answer c	Amount $
Sell price	39.99
Less: Variable cost per unit	16.95	See A
Contribution margin per unit	23.04	E
Fixed costs	800,000.00	See D
Break even units	34,722.22	F=D/E
Yes Lamps R Us break even on a cash basis.
Answer c	Amount $
Contribution margin per unit	23.04	See E
Fixed costs	800,000.00
Depreciation	400,000.00
Total fixed costs	1,200,000.00	G
Accounting Break even units	52,083.33	H=G/E