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

Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $12.20 per unit, and the variable labor cost is $6.00 per unit.

What is the variable cost per unit? (Round your answer to 2 decimal places. (e.g., 32.16))

Suppose NSI incurs fixed costs of $600,000 during a year in which total production is 250,000 units. What are the total costs for the year?

If the selling price is $43.00 per unit, what is the cash break-even point? If depreciation is $400,000 per year, what is the accounting break-even point? (Round your answers to 2 decimal places. (e.g., 32.16))

What is the variable cost per unit? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $12.20 per unit, and the variable labor cost is $6.00 per unit.

A. What is Variable Cost per Unit.

Variable Cost = $12.20 + 6.00 = $18.20

B. Suppose NSI incurs fixed costs of $600,000 during a year in which total production is 250,000 units. What are the total costs for the year?

Total Cost = ($18.20)(250,000 units) + $600,000 = $5,150,000

C. If the selling price is $43.00 per unit, what is the cash break-even point? If depreciation is $400,000 per year, what is the accounting break-even point?

Break Even means Revenue = Cost

Cash break even point:

Let x = number of units

($43)(x) = ($18.20)(x) + $600,000

24.8x = 600,000

x = 24193.55 units

Accounting Break Even Point:

With depreciation being $400,000, the total fixed costs become: $600,000 + $400,000 = $1,000,000

Let x = number of units

($43)(x) = ($18.20)(x) + $1,000,000

24.8x = 1,000,000

x = 40,322.58 units

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