Break-Even Point in Sales Dollars

Amount Descriptions

Operating income

Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation.

Operating loss

Sales

Total contribution margin

Total fixed cost

Total variable cost

Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Variable cost is 60% of the sales price; contribution margin is 40% of the sales price. Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).

	Required:
1.	Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation.
2.	Check your answer by preparing a contribution margin income statement based on the break-even point in sales dollars.