Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $15.60 per unit, and the variable labor cost is $5.70 per unit. a. What is the variable cost per unit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose the company incurs fixed costs of $540,000 during a year in which total production is 220,000 units. What are the total costs for the year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. If the selling price is $41.50 per unit, what is the cash break-even point? If depreciation is $340,000 per year, what is the accounting break-even point? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

a. The variable cost per unit is $21.30

b. The total costs for the year are $5,226,000

c. The cash break-even point is 26,733 units . The accounting break-even point is 43,564 units

Explanation:

a. In order to calculate the variable cost per unit we would have to make the following calculation:

Variable cost = $15.60 + $5.70

= $21.30

b. To calculate the total costs for the year we would have to make the following calculation:

Total costs = $540,000 + 220,000 * $21.30

= $5,226,000

c. To calculate the cash break-even point we would have to make the following calculation:

Cash break-even point = $540,000 / ($41.50 - $21.30)

= 26,733 units

To calculate the accounting break-even point we would have to make the following calculation:

Accounting break-even point = ($540,000 + $340,000) / ($41.50 - $21.30)

= 43,564 units