Question
Head- First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct
Head- First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense.) Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).
Required:
1. Calculate the Contribution Margin per unit.
2. Calculate the break-even sales in units and in sales dollars.
3. Check your answer in no. 2 by preparing a contribution margin income statement based on the break-even units.
4. Calculate the Margin of Safety a) in terms of number of helmets and b) in terms of sales revenue
5. Calculate the number of helmets Head-First must sell to earn an operating income of $81,900.
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