Question

Head-First Company plans to sell 5,100 bicycle helmets at $78 each in the coming year. Unit variable cost is $48.36 (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 $29,900 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

Answer 1

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A B C D E F 1 2 5100 Bicycle helmets 78 3 4 Units Selling price Variable cost Fixed factory overhead Fixed selling and administrative expenses 5 48.36 19000 29900 6 7 Variable cost ratio 62% Variable cost/Selling price 8 a 9 10 b. 11 78 Contribution margin ratio Selling price Variable cost Contribution 12 48.36 13 29.64 14 15 Contribution margin ratio 38% Contribution/Selling price 16 17 C. 18 19 20 Contribution margin income statement Particulars Amount Percentage Sales 397800 100% Variable cost 246636 62% Contribution margin 151164 38% Fixed factory overhead 19000 Fixed selling and administrative expenses 29900 Net income 102264 21 22 23 24 25 KI Ready Sheet234 Sheet235 Sheet236 Sheet237 Sheet238 Sheet239 Sheet240 Sheet

For calculation ref:

A B C E F 3 9 1 2 Units 5100 Bicycle helmets 3 Selling price 78 4 Variable cost 48.36 5 Fixed factory overhead 19000 6 Fixed selling and administrative expenses 29900 7 8 a Variable cost ratio =C4/C3 Variable cost/Selling price 9 10 b. Contribution margin ratio 11 Selling price 78 12 Variable cost 48.36 13 Contribution =C11-C12 14 15 Contribution margin ratio =C13/c11 Contribution/Selling price 16 17 c. Contribution margin income statement 18 Particulars Amount Percentage 19 Sales =C3*C2 =D19/019 20 Variable cost =C4*C2 =D20/D19 21 Contribution margin =D19-D20 =D21/D19 22 Fixed factory overhead =C5 23 Fixed selling and administrative expenses =C6 24 Net income =D21-D22-D23 25 Sheet234 Sheet235 Sheet236 Sheet237 Sheet238 Sheet239 Sheet240 Sheet241 Sta Ready