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Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $72 and have variable costs of $42

Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $72 and have variable costs of $42 each. The motorcycle helmets are priced at $210 and have variable costs of $145 each. Total fixed cost for Head-First as a whole equals $44,800 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 4,800 bicycle helmets and 1,920 motorcycle helmets.

Required:
1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.
2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.
3.

Check your answer by preparing a contribution margin income statement.

1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.

Product Price Unit Variable Cost Unit Contribution Margin Sales Mix Package Contribution Margin
Bicycle helmet
Motorcycle helmet
Package total

2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.

Break-Even Bicycle Helmets
Break-Even Motorcycle Helmets

3. Check your answer by preparing a contribution margin income statement. 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

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3

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