Question

Hello! So i am trying to solve some of these questions, and this is one of the problems I am stuck on.

If someone could provide a step by step that would be great, thanks.

Head-First Company now sells both bicycle helmets and motorcycle helmets. Next year, Head- First expects to produce total revenue of $560,000 and incur total variable cost of $368,000. Total fixed cost is expected to be $57,200. Required: 1. Calculate the break-even point in sales dollars for Head-First. Round the contribution margin ratio to four decimal places and sales to the nearest dollar 2. Check your answer by preparing a contribution margin income statement

Answer 1

1.

Contribution margin = Sales – Variable cost

= 560,000 - 368,000

= $192,000

Contribution margin ratio = Contribution margin/Sales

= 192,000/560,000

= 34.2857%

Break even sales in dollars = Fixed cost/Contribution margin ratio

= 57,200/34.2857%

= $166,834

2.

Contribution margin income statement

Sales	166,834
Variable cost	- 109,634
Contribution margin	57,200
Fixed cost	- 57,200
Operating income	$0

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