my question is question 2 , computing average cost, thank you !
all businesses will MAN Analysis (LO2] You are at work when a co-worker excitedly to your desk and shows you the scenario analysis that he has just completed potential new project. All three scenarios show a positive NPV. He states. We to take this project!" What is your initial reaction regarding this new project. Do believe the results of the scenario analysis? We have HD PROBLEMS connect IC 15) 1. FINANCE 2. Calculating Costs and Break-Even (LO3] Night Shades, Inc. (NSI), manufa tures biotech sunglasses. The variable materials cost is $9.64 per unit, and the vari able labor cost is $8.63 per unit. a. What is the variable cost per unit? b. Suppose NSI incurs fixed costs of $915,000 during a year in which total produc- tion is 215,000 units. What are the total costs for the year? c. If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation is $465,000 per year, what is the accounting break-even point? Computing Average Cost [LO3] K-Too Everwear Corporation can manufacture mountain climbing shoes for $35.85 per pair in variable raw material costs and $26.45 per pair in variable labor expense. The shoes sell for $165 per pair. Last year, production was 145,000 pairs. Fixed costs were $1,750,000. What were total produc- tion costs? What is the marginal cost per pair? What is the average cost? If the com- pany is considering a one-time order for an extra 5.000 pairs, what is the minimum acceptable total revenue from the order? Explain. Scenario Analysis (LO2] Sloan Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,700 per unit: variable costs $480 per unit; fixed costs = $4.1 million; quantity = 95.000 units. Suppose the company believes all of its estimates are accurate only to within 15 percent. What values should the company use for the four variables given here when it performs its best- case scenario analysis? What about the worst-case scenario? Sensitivity Analysis (LO1] For the company in the previous problem, suppose management is most concerned about the impact of its price estimate on the project's profitability. How could you address this concern? Describe how you would calculate your answer. What values would you use for the other forecast variables? Sensitivity Analysis and Break-Even (LO1, 3] We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that de- preciation is straight-line to zero over the life of the project. Sales are projected at 71,000 units per year. Price per unit is $49, variable cost per unit is $33, and nxe costs are $765,000 per year. The tax rate is 35 percent, and we require a return of percent on this project. a. Calculate the accounting break-even point. What is the degree of operating te age at the accounting break-even point? 5
