Question
Part 1 Head-First Company plans to sell 5,200 bicycle helmets at $80 each in the coming year. Variable cost is 54% of the sales price;
Part 1
Head-First Company plans to sell 5,200 bicycle helmets at $80 each in the coming year. Variable cost is 54% of the sales price; contribution margin is 46% of the sales price. Total fixed cost equals $56,350 (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. |
Amount Descriptions
Refer to the list below for the exact wording of text items within your income statement.
Amount Descriptions | |
Operating income | |
Operating loss | |
Sales | |
Total contribution margin | |
Total fixed cost | |
Total variable cost |
Sales Revenue
1. Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation.
Contribution Margin Income Statement
2. Check your answer by preparing a contribution margin income statement based on the break-even point in sales dollars. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.
Head-First Company |
Contribution Margin Income Statement |
At Break-Even Point |
1 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
5 |
| _________________________ ___________________________ |
Part 2
Head-First Company plans to sell 5,800 bicycle helmets at $67 each in the coming year. Unit variable cost is $44 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $40,710 (includes fixed factory overhead and fixed selling and administrative expense).
Required: | |
1. | Calculate the break-even number of helmets. |
2. | Check your answer by preparing a contribution margin income statement based on the break-even units. |
Amount Descriptions
Refer to the list below for the exact wording of an amount description within your income statement.
Amount Descriptions | |
Operating income | |
Operating loss | |
Sales | |
Total contribution margin | |
Total fixed cost | |
Total variable cost |
Unit Break-Even Point
1. Calculate the break-even number of helmets.
helmets
Contribution Margin Income Statement
2. Check your answer by preparing a contribution margin income statement based on the break-even units. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement. If there is an operating loss, enter the amount as a negative number using a minus sign.
Head-First Company |
Contribution Margin Income Statement |
At Break-Even Point |
1 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
5 |
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started