Question

Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Product costs include:

Direct materials per helmet	$ 30
Direct labor per helmet	8
Variable factory overhead per helmet	4
Total fixed factory overhead	20,000

Variable selling expense is a commission of $3 per helmet; fixed selling and administrative expense totals $29,500.

	Required:
1.	Calculate the total variable cost per unit.
2.	Calculate the total fixed expense for the year.
3.	Prepare a contribution margin income statement for Head-First Company for the coming year.

Answer 1

Solution: Requirement - 1 Calculate the total variable costs: Add: Add: Add: Variable cost Particulars Materials Labor Overhead Selling expenses Total $ $ $ $ S Amount 30.00 8.00 4.00 3.00 45.00 Therefore, calculated total variable cost per unit is $45 Requirement - 2 Calculate the total fixed expense for the year:

Fixed costs Particulars Fixed overhead Selling Total $ $ Amount 20,000.00 29,500.00 49,500.00 Add: S Therefore, calculated the total fixed expense for the year is $49,500 Requirement - 3 Prepare a contribution margin income statement for Head-First Company for the coming year:

Less: Particulars Sales revenue Variable cost Contribution Fixed cost Pre tax income Income statement Per unit Total Calculation $ 75.00 $ 3,75,000.00 Sales unit *Sales per unit $ 45.00 $ 2,25,000.00 Sales unit *Varaibles per unit S 30.00 S 1,50,000.00 Sales unit *Contribution per unit $ 49,500.00 S 1,00,500.00 Less:

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