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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $1.28 per unit, and the variable labor cost is $2.56 per unit.

Suppose NSI incurs fixed costs of $650,000 during a year in which total production is 227,500 units. What are the total costs for the year? (Do not round your intermediate calculations.)

If the selling price is $11.15 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 $102,375 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 $1.28 per unit, and the variable labor cost is $2.56 per unit.

Explanation / Answer

1)

Variable cost per unit = variable materials cost + variable labor cost

Variable cost per unit = 1.28 + 2.56

Variable cost per unit = 3.84

2)

Total costs for the year = fixed costs + Variable cost per unit * No of unit

Total costs for the year = 650000 + 3.84*227500

Total costs for the year = $ 1,523,600

3)

a)

Break-even on a cash flow basis = Fixed cost/(Sellling Price per unit - Variable cost per unit)

Break-even on a cash flow basis = 650000/(11.15-3.84)

Break-even on a cash flow basis = 88919 units

b)

Accounting break-even point = Fixed cost including depreciation /(Sellling Price per unit - Variable cost per unit)

Accounting break-even point = (650000+102375)/(11.15-3.84)

Accounting break-even point = 102,924 Units

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.