Question

Break-Even Point in Units Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $48 (includes direct materials, direct labour, variable factory overhead, and variable selling expense). Total fixed cost equals $69,390 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the break-even number of helmets. If required, round your answer to the nearest whole unit and use rounded amount in subsequent requirements. helmets 2. 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

Answer 1

Contribution margin per helmet = Selling price per helmet - Variable cost per helmet

= $75 - $48

= $27

1)

Breakeven point in helmets = Fixed cost / Contribution margin per helmet

= $69,390 / $27

= 2,570 helmets

2)

	Total
Sales (2,570 X $75)	$192,750
Variable cost (2,570 X $48)	$123,360
Contribution margin	$69,390
Fixed cost	$69,390
Net operating income	$0