Head-First Company plans to sell 4,400 bicycle helmets at $78 each in the coming
ID: 2422811 • Letter: H
Question
Head-First Company plans to sell 4,400 bicycle helmets at $78 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 $50,300 (includes fixed factory overhead and fixed selling and administrative expense).
Refer to the list below for the exact wording of text items within your income statement.
1. Calculate the number of helmets Head-First must sell to earn operating income of $94,900.
helmets:
2. Check your answer by preparing a contribution margin income statement based on the number of units calculated. 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
Based on Helmets Sold
1
2
3
4
Total fixed expense 50,300
5
Amount Descriptions Operating income Operating loss Sales Total contribution margin Total fixed expense Total variable expenseExplanation / Answer
1)Number of helmets = (Fixed cost + target profit)/contribution per unit
=(50,300 + 94,900)/(78- 45)
= 145,200/33
= 4,400 helemets
Sales 4,400*78 $343,200
Total revenue expense (4,400*45) 198,000
total contribution margin 145,200
total fixed expense 50,300
Operating income $94,900
1)Number of helmets = (Fixed cost + target profit)/contribution per unit
=(50,300 + 94,900)/(78- 45)
= 145,200/33
= 4,400 helemets
Sales 4,400*78 $343,200
Total revenue expense (4,400*45) 198,000
total contribution margin 145,200
total fixed expense 50,300
Operating income $94,900
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