Head-First Company plans to sell 4,700 bicycle helmets at $75 each in the coming year. Product costs include:
| Direct materials per helmet | $ 31 |
| Direct labor per helmet | 6.50 |
| Variable factory overhead per helmet | 2.75 |
| Total fixed factory overhead | 20,000 |
Variable selling expense is a commission of $3.00 per helmet; fixed selling and administrative expense totals $28,600.
| Required: | |
| 1. | Calculate the total variable cost per unit. |
| 2. | Calculate the total fixed expense for the year. |
| 3. | Prepare a contribution margin income statement for Head-First Company for the coming year. |
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 |
Cost Calculations
1. Calculate the total variable cost per unit. Round your answer to two decimal places.
Variable cost per unit
2. Calculate the total fixed expense for the year.
Total fixed expense for the year
Contribution Margin Income Statement
3. Prepare a contribution margin income statement for Head-First Company for the coming year. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement. Round your per unit answers to two decimal places.
|
Head-First Company |
|
Contribution Margin Income Statement |
|
For the Coming Year |
| 1 | Total | Per Unit | |
| 2 | |||
| 3 | |||
| 4 | |||
| 5 | |||
| 6 |
1.
Total variable cost per unit = Direct materials + Direct labor + Variable fixed overhead + Variable selling expense
= 31+6.50+2.75+3
= $43.25
2.
Total fixed expenses for the year = Total fixed factory overhead + Fixed selling and administrative expense
= 20,000+28,600
= $48,600
3.
| Head - First Company | |||
| Contribution Margin Income Statement | |||
| For the Coming Year | |||
| 1. | Total | Per Unit | |
| 2. | Sales (4,700 x 75) | 352,500 | 75 |
| 3. | Variable cost (4,700 x 43.25) | 203,375 | -43.25 |
| 4. | Contribution Margin | $149,225 | $31.75 |
| 5. | Fixed expenses | -48,600 | |
| 6. | Net Operating Income | $100,625 | |
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Head-First Company plans to sell 4,700 bicycle helmets at $75 each in the coming year. Product...
Head-First Company plans to sell 4,700 bicycle helmets at $75 each in the coming year. Product costs include: Direct materials per helmet $ 31 Direct labor per helmet 6.50 Variable factory overhead per helmet 2.75 Total fixed factory overhead 20,000 Variable selling expense is a commission of $3.00 per helmet; fixed selling and administrative expense totals $28,600. Required: 1. Calculate the total variable cost per unit. 2. Calculate the total fixed expense for the year. 3. Prepare a contribution margin...
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