Head-First Company plans to sell 4,400 bicycle helmets at $72 each in the coming year. Unit variable cost is $43.20 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is $19,000 and fixed selling and administrative expense is $29,700. Required: 1. Calculate the variable cost ratio. 2. Calculate the contribution margin ratio. 3. Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin.
1) | Variable Cost Ratio | |||||
= Variable cost per unit / sales price per unit | ||||||
=$43.20/72 | ||||||
60% | ||||||
2) | Contribution Margin Per unit = Selling price - variable cost per unit | |||||
=$72-43.20 | ||||||
$ 28.80 | ||||||
Contribution margin ratio = Contribution margin per unit/ sales perice per unit | ||||||
=$28.80/72 | ||||||
40% | ||||||
3) | ||||||
Contribution margin statement | ||||||
Sales (4400 bicycle*$72) | $ 3,16,800 | 100% | ||||
Less: | ||||||
Total Variable cost (4400 bicycle*$43.20) | $ 1,90,080 | 60% | ||||
Total Contribution margin | $ 1,26,720 | 40% | ||||
Less: | ||||||
Fixed factory overhead | $ 19,000 | |||||
fixed selling and administrative expense | $ 29,700 | |||||
Net Income | $ 78,020 |
Head-First Company plans to sell 4,400 bicycle helmets at $72 each in the coming year. Unit...
Head-First Company plans to sell 4,400 bicycle helmets at $72 each in the coming year. Unit variable cost is $43.20 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is $19,000 and fixed selling and administrative expense is $29,700. Required: 1. Calculate the variable cost ratio. 2. Calculate the contribution margin ratio. 3. Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income...
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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. Refer to the list below for the exact wording...
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Head-First Company plans to sell 5,100 bicycle helmets at $72 each in the coming year. Variable cost is 62% of the sales price; contribution margin is 38% of the sales price. Total fixed cost equals $50,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Head-First must make to earn operating income of $73,120 by using the point in sales equation. 2. Check your answer by preparing a contribution margin income statement...
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