Question

# Units to Earn Target Income Head-First Company plans to sell 5,000 bicycle helmets at \$75 each...

Units to Earn Target Income

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: Be sure to read the instructions on each panel for additional guidance. 1. Calculate the number of helmets Head-First must sell to earn operating income of \$81,900. 2. Check your answer by preparing a contribution margin income statement based on the number of units calculated

1) Calculate the number of helmets Head-First must sell to earn operating income of \$81,900.

Number of helmet sold = Fixed cost+Operating income/contribution margin per unit

= 49500+81900/(75-45)

Number of helmet sold = 4380

2) Check your answer by preparing a contribution margin income statement based on the number of units calculated

 Sale (4380*75) 328500 Less: Variable cost (4380*45) (197100) Contribution margin 131400 Less: FIxed cost (49500) Operating income 81900

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