Question

Head-First Company plans to sell 4,400 bicycle helmets at $72 each in the coming year. Product costs include: Direct materials per helmet $ 30 Direct labor per helmet 5.00 Variable factory overhead per helmet 4.50 Total fixed factory overhead 20,000 Variable selling expense is a commission of $3.30 per helmet; fixed selling and administrative expense totals $28,500. Required: 1. Calculate the total variable cost per unit. 2. Calculate the total fixed expense for the year. 3. Prepare a contribution margin income statement for Head-First Company for the coming year.

Answer 1

1
Direct materials	30.00
Direct labor	5.00
Variable factory overhead	4.50
Variable selling expense	3.30
Total variable cost per unit	42.80
2
Total fixed expense for the year	48500	=20000+28500
3
Contribution Margin Income Statement
	Total	Per unit
Sales	316800	72.00
Total Variable Expense	188320	42.80
Total contribution margin	128480	29.20
Total fixed expense	48500
Operating income	79980