Calculat ing Costs and Break- Even . Night Shades, Inc. ( NSI), manufactures bio
ID: 2724734 • Letter: C
Question
Calculating Costs and Break- Even.
Night Shades, Inc. ( NSI), manufactures biotech sunglasses. The variable materials cost is $ 10.48 per unit, and the variable labor cost is $ 6.89 per unit.
a. What is the variable cost per unit?
b. Suppose NSI incurs fixed costs of $ 870,000 during a year in which total production is 280,000 units. What are the total costs for the year?
c. If the selling price is $ 49.99 per unit, does NSI break even on a cash basis? If depreciation is $ 490,000 per year, what is the accounting break- even point?
Explanation / Answer
a) variable cost per unit is=10.48 + 6.89
= $17.37
2) Fixed cost= $870,000
Total production = 280,000 units
Total cost is = 870,000+ 280,000 x (17.37)
= $5,733,600
3) selling price $49.99
Total revenue genrated by selling 280,000 unit is 280000 x 49.99
=$13,997,200
So profits are $13,997,200 - $5,733,600 = $9,133,600
If depriciation is 490,000 then
breakeven unit will be = (870000 + 490000) / (49.99 -17.37)
= 41693 unit