Question

Problem 11-1 Calculating Costs and Break-Even [LO3]

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $10.80 per unit, and the variable labor cost is $6.70 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 $740,000 during a year in which total production is 320,000 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 $46.50 per unit, what is the cash break-even point? If depreciation is $540,000 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.) a. Variable cost per unit b. Total cost c. Cash break-even point units Accounting break-even point units

Answer 1

Solution: a) Variable material cost per unit Variable labor cost per unit Variable cost perunit 10.80 6.70 17.50 b) Variable cost per unit x Units Total variable cost Add: Fixed cost Total cost 17.50 320,000 5,600,000 740,000 6,340,000 Sale Price Depreciation 46.50 540,000 25,517.24 cash break even point=Cash Fixed cost/Contribution margin per unit) 740000/46.50-17.50) 44,137.93 Accounting Break-even sales (Cash Fixed cost+Depreciation)/Contribution margin per unit (740000+540000)/(46.50-17.50)