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).
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|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
Number of helmet sold = 4380
2) Check your answer by preparing a contribution margin income statement based on the number of units calculated
|Less: Variable cost (4380*45)||(197100)|
|Less: FIxed cost||(49500)|
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