Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Wiley CPA Exam Review Auditing And Attestation 2011

Authors: Patrick R. Delaney, O. Ray Whittington

8th Edition

0470554347, 978-0470554340

More Books

Students also viewed these Accounting questions

Question

How can the Internet be helpful in a job search? (Objective 2)

Answered: 1 week ago