Question

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 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.

1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.

Product	Price	Unit Variable Cost	Unit Contribution Margin	Sales Mix	Package Contribution Margin
Bicycle helmet
Motorcycle helmet
Package total

2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.

Break-Even Bicycle Helmets

Break-Even Motorcycle Helmets

3. Check your answer by preparing a contribution margin income statement. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Head-First Company

Contribution Margin Income Statement

At Break-Even Point

1
2
3
4
5

Answer 1