Question

Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $73 and have variable costs of $44 each. The motorcycle helmets are priced at $205 and have variable costs of $145 each. Total fixed cost for Head-First as a whole equals $50,350 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 4,850 bicycle helmets and 1,940 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.

Amount Descriptions

Refer to the list below for the exact wording of text items within your income statement.

Amount Descriptions
Operating income
Operating loss
Sales
Total contribution margin
Total fixed cost
Total variable cost

Sales Mix and Break-Even Point

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

Contribution Margin Income Statement

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
2
3
4
5

Answer 1

Page 1 Product I price unit T unit variable contributia sales mix cast I n margin buria Sales J Package contribution margin. Bicycle helmek 73 motorcycle revenge 200 Package total tot 145 29 60 4850 1940 116400 25 7050 Break eren Point = 50350/257050 0-19588 Break even - Bicycle Helment Break even notorcycle Herret = 0.19588* 4850 950 380

page-2 Head - first company. Contribution margin in come statement. t. - Atbreak even point Bicycle motorcycle total helmet helmet contribution per unit 29 units at break even total contribution. 27550 22800 50350 tesss : fixed cost 570350 Profit 950 380 -xo xo -