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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.24 per unit, and the variable labor cost is $2.11 per unit.
  
Requirement 1:
What is the variable cost per unit?

a. 1.24

b. 3.25

c. 3.35

d. 2.11

e. 3.45

Requirement 2:
Suppose NSI incurs fixed costs of $670,000 during a year in which total production is 368,500 units. What are the total costs for the year? (Do not round your intermediate calculations.)

a. 1,234,475

b. 1.999.699

c. 1,809,251

d. 1,804,475

e. 1,904,475

Requirement 3:
(a) If the selling price is $11.7 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.)

a. 80,240 units

b. 84,252 units

c. 81, 240 units

d. 76,228 units

e. 104,512 units

(b) If depreciation is $202,675 per year, what is the accounting break-even point (in units)? (Do not round your intermediate calculations.)

a.80,240 units

b. 99,286 units

c. 99,512 units

d. 104,512 units

e. 109,738 units

Explanation / Answer

1) Variable Cost Per unit = 1.24 + 2.11 (i.e. both material and labour) = 3.35

Correct choice: C

2) Total costs = Variable cost per unit * Output + Fixed Cost = 3.35 * 368500 + 670000 = 1904475

Correct choice: E

3) Break Even point = Fixed Costs / ( Sales Per unit - Variable Cost per unit) = 670000 / ( 11.7 - 3.35 ) = 80240

Correct Choice: A

Accounting Break even point = ( 670000 + 202675 ) / ( 11.7 - 3.35) = 104512 units

Correct Choice: D

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