Variable Cost, Fixed Cost, Contribution Margin Income Statement

Head-First Company plans to sell 5,220 bicycle helmets at $75 each in the coming year. Product costs include:

Direct materials per helmet	$30
Direct labor per helmet	8
Variable factory overhead per helmet	4
Total fixed factory overhead	20,000

Variable selling expense is a commission of $4 per helmet; fixed selling and administrative expense totals $29,500

Calculate the total variable cost per unit. $_____?___ per unitCalculate the break-even number of helmets. Round your answer to the nearest whole.

_______?_______helmets

Check your answer by preparing a contribution margin income statement based on the break-even units. If an amount is zero, enter "0".

Head-First Company
Contribution Margin Income Statement
At Break-Even Point
Total
Sales	?
Total variable cost	?
Total contribution margin	$?
Total fixed cost	?
Operating income	$ ?

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 $49,000 (includes fixed factory overhead and fixed selling and administrative expense). If required, round your answers to nearest whole number.

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

Calculate the number of helmets Head-First must sell to earn operating income of $84,537.

______?_____ Helmets

2. Check your answer by preparing a contribution margin income statement based on the number of units calculated.

Head-First Company
Contribution Margin Income Statement
Based on number of units calculated in part 1
Total
Sales	$ ?
Total variable cost	?
Total contribution margin	?
Total fixed cost	?
Operating income	$?

Head-First Company plans to sell 4,693 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).

Calculate the sales revenue that Head-First must make to earn operating income of $81,900. Round your answer to the nearest dollar.

$______?_______

Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1. If required, round your answers to nearest whole value.

Head-First Company
Contribution Margin Income Statement
At 5,000 Helmets Sold
Total
Sales	$ ?
Total variable cost	?
Total contribution margin	$?
Total fixed cost	?
Operating income	$?

Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income

Prachi Company produces and sells disposable foil baking pans to retailers for $2.30 per pan. The variable cost per pan is as follows:

Direct materials	$0.27
Direct labor	0.52
Variable factory overhead	0.73
Variable selling expense	0.14

Fixed manufacturing costs totals $126,044 per year. Administrative cost (all fixed) totals $17,188.

Required:

• Compute the number of pans that must be sold for Prachi to break even. _____?_____Pans

Conceptual Connection: What is the unit variable cost? What is the unit variable manufacturing cost? Round your answers to the nearest cent.

Unit variable cost $_______?____

Unit variable manufacturing cost $________?_____

Which is used in cost-volume-profit analysis?What is the sales mix of DVDs and equipment sets? 1:2, 2:1, 3:2, 4:1, or 5:2

Compute the break-even quantity of each product. If required, round your calculations and answers to nearest whole value.

Break-even DVDs _____________Units

Break-even equipment sets ______________Units

Margin of Safety and Operating Leverage

Medina Company produces a single product. The projected income statement for the coming year is as follows:

Sales (40,500 units @ $49.00)	$1,984,500
Total variable cost	833,490
Contribution margin	$ 1,151,010
Total fixed cost	791,816
Operating income	$ 359,194

Compute the break-even sales dollars. If required, round your answer to nearest whole value. $________________

Compute the margin of safety in sales dollars. $________________

Compute the degree of operating leverage. Round your answer to two decimal places. $________________

Compute the new operating income if sales are 20% higher than expected. Round intermediate calculations to two decimal places. Round your final answer to the nearest dollar. $________________

Variable Cost, Fixed Cost, Contribution Margin Income Statement HeadFirst Company plans to sell 5,220 bicycle helmets at $75 each in the coming year. Product costs include: Direct materials per helmet $30 Direct labor per helmet 8 Variable factory overhead per helmet 4 Total fixed factory overhead 20,000 Variable selling expense is a commission of $4 per helmet; fixed selling and administrative expense totals $29,500 1. Calculate the total variable cost per unit. $_____?___ per unit 3. Prepare a contribution margin income statement for HeadFirst Company for the coming year. HeadFirst Company Contribution Margin Income Statement For the Coming Year Total Total Per unit Per unit Sales $? ? Total variable cost ? ? Total contribution margin ? ? Total fixed cost ? Operating income ? BreakEven Point in Units HeadFirst Company plans to sell 5,000 bicycle helmets at $67 each in the coming year. Unit variable cost is $41 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $65,780 (includes fixed factory overhead and fixed selling and administrative expense). 1. Calculate the break-even number of helmets. Round your answer to the nearest whole. _______?_______ 2. helmets Check your answer by preparing a contribution margin income statement based on the break even units. If an amount is zero, enter "0". Head-First Company Head-First Compa Contribution Marg Contribution Margin Income Statement At Break-Even Po At Break-Even Point Total Sales ? Total variable cost ? Total contribution margin $? Total fixed cost ? Operating income Total $? HeadFirst 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 $49,000 (includes fixed factory overhead and fixed selling and administrative expense). If required, round your answers to nearest whole number. 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 breakeven point in sales dollars. If an amount is zero, enter "0". Head-First Company Head-First Compa Contribution Marg Contribution Margin Income Statement At Break-Even Po At Break-Even Point Total Sales ? Total variable cost ? Total contribution margin ? Total fixed cost ? Operating income Total ? HeadFirst Company plans to sell 5,000 bicycle helmets at $72 each in the coming year. Unit variable cost is $42 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $51,813 (includes fixed factory overhead and fixed selling and administrative expense). 1. Calculate the number of helmets HeadFirst must sell to earn operating income of $84,537. ______?_____ Helmets 2. Check your answer by preparing a contribution margin income statement based on the number of units calculated. Head-First Company Head-First Compa Contribution Marg Contribution Margin Income Statement Based on number of units calculated in part 1 Based on number Total Sales $? Total variable cost ? Total contribution margin ? Total Total fixed cost ? Operating income $? HeadFirst Company plans to sell 4,693 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). 1. Calculate the sales revenue that HeadFirst must make to earn operating income of $81,900. Round your answer to the nearest dollar. $______?_______ 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1. If required, round your answers to nearest whole value. Head-First Company Head-First Compa Contribution Marg Contribution Margin Income Statement At 5,000 Helmets At 5,000 Helmets Sold Total Sales $? Total variable cost ? Total contribution margin $? Total fixed cost ? Operating income Total $? Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income Prachi Company produces and sells disposable foil baking pans to retailers for $2.30 per pan. The variable cost per pan is as follows: Direct materials $0.27 Direct labor 0.52 Variable factory overhead 0.73 Variable selling expense 0.14 Fixed manufacturing costs totals $126,044 per year. Administrative cost (all fixed) totals $17,188. Required: 1. Compute the number of pans that must be sold for Prachi to break even. _____?_____Pans 2. Conceptual Connection: What is the unit variable cost? What is the unit variable manufacturing cost? Round your answers to the nearest cent. Unit variable cost $_______?____ Unit variable manufacturing cost $________?_____ 3. Which is used in cost-volume-profit analysis? Unit Variable Manufacturing Cost OR Unit Variable Cost? Why? _________________________ How many units must be sold for Prachi to earn operating income of $4,224? _________?________Pans How much sales revenue must Prachi have to earn operating income of $4,224? $_________?___________ Peace River Products Inc. produces and sells yogatraining products: howto DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Peace River Products sold 18,000 DVDs and 4,500 equipment sets. Information on the two products is as follows: DVDs Price Equipment Sets $13 Variable cost per unit $14 3 7 Total fixed cost is $84,000. 1. What is the sales mix of DVDs and equipment sets? 1:2, 2:1, 3:2, 4:1, or 5:2 2. Compute the breakeven quantity of each product. If required, round your calculations and answers to nearest whole value. Breakeven DVDs _____________Units Breakeven equipment sets ______________Units Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement for the coming year is as follows: Sales (40,500 units @ $49.00) Total variable cost Contribution margin Total fixed cost Operating income $1,984,500 833,490 $ 1,151,010 791,816 $ 359,194 1. Compute the breakeven sales dollars. If required, round your answer to nearest whole value. $________________ 2. Compute the margin of safety in sales dollars. $________________ 3. Compute the degree of operating leverage. Round your answer to two decimal places. $________________ 4. Compute the new operating income if sales are 20% higher than expected. Round intermediate calculations to two decimal places. Round your final answer to the nearest dollar. $________________ Variable Cost, Fixed Cost, Contribution Margin Income Statement HeadFirst Company plans to sell 5,220 bicycle helmets at $75 each in the coming year. Product costs include: Direct materials per helmet $30 Direct labor per helmet 8 Variable factory overhead per helmet 4 Total fixed factory overhead 20,000 Variable selling expense is a commission of $4 per helmet; fixed selling and administrative expense totals $29,500 1. Calculate the total variable cost per unit. $_____?___ per unit 3. Prepare a contribution margin income statement for HeadFirst Company for the coming year. HeadFirst Company Contribution Margin Income Statement For the Coming Year Total Total Per unit Per unit Sales $ 391500 75 Total variable cost ? ? Total contribution margin ? ? Total fixed cost ? Operating income ? Variable Cost, Fixed Cost, Contribution Margin Income Statement HeadFirst Company plans to sell 5,220 bicycle helmets at $75 each in the coming year. Product costs include: Direct materials per helmet $30 Direct labor per helmet 8 Variable factory overhead per helmet 4 Total fixed factory overhead 20,000 Variable selling expense is a commission of $4 per helmet; fixed selling and administrative expense totals $29,500 1. Calculate the total variable cost per unit. $_____?___ per unit 3. Prepare a contribution margin income statement for HeadFirst Company for the coming year. HeadFirst Company Contribution Margin Income Statement For the Coming Year Total Total Per unit Per unit Sales $ 391500 75 Total variable cost ? ? Total contribution margin ? ? Total fixed cost ? Operating income