Question

Break-Even Point in Units Head-First Company plans to sell 5,000 bicycle helmets at $71 each in the coming year. Unit variable cost is $48 (includes direct materials, direct labour, variable factory overhead, and variable selling expense). Total fixed cost equals $44,390 (includes fixed factory overhead and fixed selling and administrative expense) Required: 1. Calculate the break-even number of helmets. If required, round your answer to the nearest whole unit and use rounded amount in subsequent requirements. helmets 2. Check your answer by preparing a contribution margin income statement based on the break-even units. If an amount is zero, enter "0" Head-First Company Contribution Margin Income Statement At Break-Even Point Total

Answer 1

Answer to Requirement 1.
Unit Contribution Margin = Unit Selling Price – Unit Variable Cost
Unit Contribution Margin = $71 - $48
Unit Contribution Margin = $23

Break Even Point (in Units) = Fixed Cost / Unit Contribution Margin
Break Even Point (in Units) = $44,390 / $23
Break Even Point (in Units) = 1,930 Helmets

Answer to Requirement 2.

Head-First Company Contribution Margin Income Statement At Break Even Point Sales Variable Expenses Contribution Margin Fixed Expenses Operating Income 137,030 92,640 44,390 44,390

Sales = 1,930 * $71 = $137,030
Variable Expenses = 1,930 * $48 = $92,640