Question

Break-Even Point in Sales Dollars

Amount Descriptions

Operating income

Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation.

Operating loss

Sales

Total contribution margin

Total fixed cost

Total variable cost

Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Variable cost is 60% of the sales price; contribution margin is 40% of the sales price. Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).

Required: | |

1. | Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation. |

2. | Check your answer by preparing a contribution margin income statement based on the break-even point in sales dollars. |

Answer #1

1. Break even point is the point where total sales is equal to total costs. There is no profit no loss.

**Break even point in sales = Fixed costs/
contribution margin ratio**

Break even point in sales = 49,500/40%

= $123,750

2. Statement showing net income using break even sales:

Particulars |
Amtin$ |

Sales revenues | 123,750 |

Less Variable costs (123,750 × 60%) | (74,250) |

Total contribution margin | 49,500 |

Less Fixed costs | (49,500) |

Net income | 0 |

As the net income is 0(zero), it shows the sales revenues of $ 123,750 is break even sales.

Head-First Company plans to sell 5,000 bicycle helmets at $75
each in the coming year. Variable cost is 60% of the sales price;
contribution margin is 40% of the sales price. Total fixed cost
equals $49,500 (includes fixed factory overhead and fixed selling
and administrative expense).
Required:
1.
Calculate the sales revenue
that Head-First must make to break even by using the break-even
point in sales equation.
2.
Check your answer by preparing
a contribution margin income statement based on...

Suppose that Head-First Company now sells both bicycle helmets
and motorcycle helmets. The bicycle helmets are priced at $76 and
have variable costs of $43 each. The motorcycle helmets are priced
at $205 and have variable costs of $130 each. Total fixed cost for
Head-First as a whole equals $59,850 (includes all fixed factory
overhead and fixed selling and administrative expense). Next year,
Head-First expects to sell 5,250 bicycle helmets and 2,100
motorcycle helmets.
Required:
1.
Form a package of...

Head-First Company plans to sell 4,400 bicycle helmets at $70
each in the coming year. Variable cost is 60% of the sales price;
contribution margin is 40% of the sales price. Total fixed cost
equals $50,300 (includes fixed factory overhead and fixed selling
and administrative expense). Required:
1. Calculate the sales revenue that Head-First must make to earn
operating income of $78,500 by using the point in sales
equation.
2. Check your answer by preparing a contribution margin income
statement...

Head-First Company plans to sell 4,400 bicycle helmets at $84
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 $60,450 (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.
1. Calculate the break-even number of helmets.
helmets
2....

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.

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.

Suppose that Head-First Company now sells both bicycle helmets
and motorcycle helmets. The bicycle helmets are priced at $77 and
have variable costs of $47 each. The motorcycle helmets are priced
at $220 and have variable costs of $145 each. Total fixed cost for
Head-First as a whole equals $57,000 (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...

Suppose that Head-First Company now sells both bicycle helmets
and motorcycle helmets. The bicycle helmets are priced at $72 and
have variable costs of $42 each. The motorcycle helmets are priced
at $210 and have variable costs of $145 each. Total fixed cost for
Head-First as a whole equals $44,800 (includes all fixed factory
overhead and fixed selling and administrative expense). Next year,
Head-First expects to sell 4,800 bicycle helmets and 1,920
motorcycle helmets. Required:
1. Form a package of...

Contribution Margin Ratio, Variable Cost Ratio, Break-Even Sales
Revenue
The controller of Ashton Company prepared the following
projected income statement:
Sales
$88,000
Total Variable cost
64,240
Contribution
margin
$23,760
Total Fixed cost
9,180
Operating income
$14,580
Required:
1. Calculate the contribution margin
ratio.
%
2. Calculate the variable cost ratio.
%
3. Calculate the break-even sales revenue for
Ashton.
$
4. How could Ashton increase projected
operating income without increasing the total sales revenue?

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 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...

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