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Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are...

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

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Head-First Company
1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.
Bicycle Helmets Motorcycle Helmets
Selling price                      73.00                             205.00
Variable cost per unit                      44.00                             145.00
Contribution Margin (CM) per unit                      29.00                               60.00
Number of Units                4,850.00                          1,940.00
Contribution Margin (CM)           140,650.00                     116,400.00
Total CM                     257,050.00
Total Fixed cost                        50,350.00
Gross Profit                     206,700.00
2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.
Selling price Variable cost per unit Contribution Margin (CM) Sales Mix Sales Mix Ratio Weighted Average Contribution Margin (WACM) Break-even point
Bicycle Helmets                      73.00                               44.00        29.00 4,850.00          0.71 20.71429 950.00 (1,330 * Sales Mix Ratio)
Motorcycle Helmets                   205.00                             145.00        60.00 1,940.00          0.29 17.14286 380.00 (1,330 * Sales Mix Ratio)
6,790.00 37.85714
Break-even point in units = Total Fixed Cost / WACM
Break-even point in units = 50,350 / 37.85714286
Break-even point in units = 1,330 units
3. Check your answer by preparing a contribution margin income statement.
Bicycle Helmets Motorcycle Helmets
Selling price                      73.00                             205.00
Variable cost per unit                      44.00                             145.00
Contribution Margin (CM) per unit                      29.00                               60.00
Number of Units                   950.00                             380.00
Contribution Margin (CM)              27,550.00                       22,800.00
Total CM                       50,350.00
Total Fixed cost                        50,350.00
Gross Profit                                      -  
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