Question

# Head-First Company plans to sell 5,000 bicycle helmets at \$75 each in the coming year. Unit...

Head-First Company plans to sell 5,000 bicycle helmets at \$75 each in the coming year. Unit variable cost is \$45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals \$49,500 (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.

 Requirement 1. Selling price per unit \$75 Given Variable Cost per unit \$45 Given Contribution per unit \$30 \$75 - \$45 Fixed Cost \$49,500 Given Break even in units 1650 (\$49,500 / \$30) Break vene Number of Helmets = 1,650 units Requirement 2. Contribution Margin Income Statements Sales (1,650 * \$75) \$123,750 Less: Variable cost (1,650 * \$45) \$74,250 Contribution Margin \$49,500 Less: Fixed Cost \$49,500 Net Operating income \$0 * In break even sales, operating income should be 0 (Zero), hence the answer is 1,650 units is right