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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.97 per unit, and the variable labor cost is $3.35 per unit.

Suppose NSI incurs fixed costs of $510,000 during a year in which total production is 280,500 units. What are the total costs for the year? (Do not round your intermediate calculations.)

If the selling price is $10.95 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.)

If depreciation is $126,225 per year, what is the accounting break-even point (in units)? (Do not round your intermediate calculations.)

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.97 per unit, and the variable labor cost is $3.35 per unit.

Explanation / Answer

1) Variable Cost = Variable Material Cost+ Variable labour cost= $1.97+$3.35 =$5.32

2) Total cost = Variable cost* Total production in units + Fixed cost = (5.32*280,500)+510,000=$2,002,260

3) Break even sales in units ( Cash flow) =Fixed cost/ Contribution per unit

=Fixed cost/ (Sales price- variable cost per unit)

= 510,000/(10.95-5.32)= 90586.15 Units

4) Break even sales in units ( In depreciation) =Fixed cost/ Contribution per unit

=Fixed cost/ (Sales price- variable cost per unit)

= (510,000+126225)/(10.95-5.32)= 113,006.22 Units

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