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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.1 per unit, and the variable labor cost is $2.09 per unit. Requirement 1: What is the variable cost per unit? (Do not round your intermediate calculations.) Requirement 2: Suppose NSI incurs fixed costs of $620,000 during a year in which total production is 341,000 units. What are the total costs for the year? (Do not round your intermediate calculations.) Requirement 3: (a) If the selling price is $9.55 per unit, what is the NSI break-even on a cash flow basis (in units)? (The level of sales in units at which the cash flow is zero). (Do not round your intermediate calculations.) (b) If depreciation is $153,450 per year, what is the accounting break-even point (in units)? (Do not round your intermediate calculations.)

Explanation / Answer

1.VARIABLE COST PER UNIT=VARIABLE MATERIAL COST PER UNIT+VARIABLE LABOR COST PER UNIT

=$1.1+$2.09

=$3.19

2.TOTAL COST FOR THE YEAR=FIXED COST +VARIABLE COST

FIXED COST=$6,20,000

VARIABLE COST=UNITS PRODUCED*VARIABLE COST PER UNIT

=3,41,000UNITS*$3.19

=$10,87,790

TOTAL COST=$6,20,000+$10,87,790=$17,07,790

3.(a)SELLING PRICE PER UNIT=$9.55

CONTRIBUTION PER UNIT=SELLING PRICE PER UNIT-VARIABLE COST PER UNIT=$9.55-$3.19=$6.36

BREAK EVEN SALES (IN UNITS)=FIXED COST /CONTRIBUTION PER UNIT=$6,20,000/$6.36=97,484 UNITS

(b)ACCOUNTING BREAK-EVEN POINT=(FIXED COST+DEPRECIATION)/CONTRIBUTION PER UNIT

=$(6,20,000+1,53,450)/$6.36

=1,21,612 UNITS

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