Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $76 and have variable costs of $43 each. The motorcycle helmets are priced at $205 and have variable costs of $130 each. Total fixed cost for Head-First as a whole equals $59,850 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 5,250 bicycle helmets and 2,100 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.
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.
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Part-1: Formulation of Package of Bicycle and Motorcycle helmeet- Head First company | |||||
Product | Price | Unit Variable Cost | Unit Contribution Margin | Sales Mix | Package Contribution Margin |
Bicycle helmet | 76 | 43 | 33 | 0.7143 | $23.6 |
Motorcycle helmet | 205 | 130 | 75 | 0.2857 | $21.4 |
Package total | $45.0 |
*Sales Mix= Bicycle = 5250/7350, Motorcycle= 2100/7350 |
Computation of BEP | |
Bicycle helmet (1330*0.7143) | 950 |
Motorcycle helmet (1330*0.2857) | 380 |
*(Fixed Cost/Contribution Margin) ( 59850/45) | 1,330.00 |
Statmment of income statement | |||
Bicycle helmet | Motorcycle helmet | Total | |
Sales (950*76), ( 380*205) | $72,201 | $77,896 | |
Variable expenses | $40,851 | $49,398 | |
Contribution margin | $31,351 | $28,499 | $59,849 |
Fixed expenses | $59,850 | ||
Net operating profit ( will be 0 but -1 due to rounded off) | -$1 |
Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are...
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