Question

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 of an amount description within your income statement.

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

1. Calculate the break-even number of helmets.

helmets____________

2. Check your answer by preparing a contribution margin income statement based on the break-even units. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement. If there is an operating loss, enter the amount as a negative number using a minus sign.

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Score: 0/51

Head-First Company

Contribution Margin Income Statement

At Break-Even Point

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Answer 1

1. Break-even point = Fixed cost/Contribution margin per unit = $40,7104(Selling price per unit - Variable cost) = $40,170/$67-$44) = 1770 helmets 2. A B 1 Contribution Margin income statement 2 Sales $ 1,18,590 3 Less: Total variable cost $ 77,880 4 Total contribution margin $ 40,710 5 Less: Total fixed cost $ 40,710 6 Operating income 0 Calculations: A B 1 Contribution Margin income statement 2 Sales =1770*67 3 Less: Total variable cost =1770*44 4 Total contribution margin =B2-B3 5 Less: Total fixed cost 40710 6 Operating income =B4-B5