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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $12.30 per unit, and the variable labor cost is $6.40 per unit.

What is the variable cost per unit? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Suppose NSI incurs fixed costs of $680,000 during a year in which total production is 290,000 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.)

If the selling price is $45.00 per unit, what is the cash break-even point? If depreciation is $480,000 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.)

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $12.30 per unit, and the variable labor cost is $6.40 per unit.

Explanation / Answer

a)

Variable costs per unit:

= $12.30+$6.40

= $18.70

b)

Total costs:

= 290,000×$18.70+$680,000

= $6,103,000

c)

Cash break-even point:

= Cash fixed costs÷Contribution per unit

= $680,000÷($45-$18.70)

= 25,855.51 units

Accounting break-even point:

= Total fixed costs÷Contribution per unit

= ($680,000+$480,000)÷($45-$18.70)

= 44,106.46 units

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