Question

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $10.00 per unit, and the variable labor cost is $5.50 per unit.

Varible Cost: 15.50

Total Cost: 3,600,000

If the selling price is $40.50 per unit, what is the cash break-even point? If depreciation is $300,000 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:

Accounting break even point:

Answer 1

Selling Price per unit = $40.50
Variable Cost per unit = $15.50
Fixed Cost = $3,600,000
Depreciation = $300,000

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $40.50 - $15.50
Contribution Margin per unit = $25.00

Cash Breakeven Point = Fixed Cost / Contribution Margin per unit
Cash Breakeven Point = $3,600,000 / $25.00
Cash Breakeven Point = 144,000 units

Accounting Breakeven Point = (Fixed Cost + Depreciation) / Contribution Margin per unit
Accounting Breakeven Point = ($3,600,000 + $300,000) / $25.00
Accounting Breakeven Point = 156,000 units