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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.18 per unit, and the variable labor cost is $1.89 per unit.

What is the variable cost per unit?(Do not round your intermediate calculations.)

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.)

If the selling price is $10 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 $204,600 per year, what is the accounting break-even point (in units)? (Do not round your intermediate calculations.)

If depreciation is $204,600 per year, what is the accounting break-even point (in units)? (Do not round your intermediate calculations.)

Explanation / Answer

Variable cost per unit is $ ( 1.18 + 1.89) = $ 3.07

If total production is 341,000 units, total cost is $ ( 620,000 + (3.07 x 341,000) ) = $ 1,666,870

If the selling price is $ 10 per unit, contribution margin per unit is $ (10 - 3.07) = $ 6.93

Accounting breakeven is Total fixed cost / contribution sales ratio = 620,000 / 69.3% = $ 894,660.89

Breakeven on a cash flow basis is (620,000 - 204,600) / 69.3% = $ 599,422.79

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