Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $18.50 per unit, and the variable labor cost is $7.00 per unit. a. What is the variable cost per unit? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Variable cost $ b. Suppose NSI incurs fixed costs of $800,000 during a year in which total production is 350,000 units. What are the total costs for the year? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) Total cost $ c. If the selling price is $48.00 per unit, what is the cash break-even point? If depreciation is $600,000 per year, what is the accounting break-even point? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Cash break-even point units Accounting break-even point units HintsReferenceseBook & Resources Hint #1

Answer 1

Answer:

a. $25.50

b. $9,725,000

c. Cash = 8,888.89 units

   Accounting = 35,555.56 units

Explanation:

a. Variable cost per unit = material cost + labor cost = $18.50 + $7.00 = $25.50

b. Total cost = Fixed + Variable

Variable = $25.50 $\times$ 350,000 = $8,925,000

Fixed = $800,000

Total = $800,000 + $8,925,000 = $9,725,000.00

c. Cash break even point = (Fixed cost - Depreciation)/Contribution per unit

Fixed cost = $800,000

Depreciation = $600,000

Contribution per unit = $48 (Selling price) - $25.50 (Variable cost) = $22.5

Cash Break even point = ($800,000 - $600,000)/$22.5 = 8,888.89 units

Accounting Break Even Point = Total fixed cost/ Contribution per unit

=$800,000/$22.5 = 35,555.56 units

Final Answer

a. $25.50

b. $9,725,000

c. Cash = 8,888.89 units

   Accounting = 35,555.56 units