Question

Calculator Break-Even Point in Units for a Multiple Product Firm Amount Descriptions Sales Mix and Break-Even Point Instructions Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $72 and have variable costs of $42 each. The motorcycle helmets are priced at $210 and have variable costs of $145 each. Total fixed cost for Head-First as a whole equals $44.800 (includes all foxed factory overhead and foved selling and administrative expense). Next year, Head-First expects to sell 4,800 bicycle helmets and 1,920 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 Nex

Answer 1

1)
Product	Price (A)	Unit Variable Cost (B)	Unit Contribution Margin (A - B )	Sales Mix	Package Contribution Margin
Bicycle helmet	$ 72	$ 42	$ 30	4,800	$ 144,000
Motorcycle helmet	$ 210	$ 145	$ 65	1,920	$ 124,800
Package total					$ 268,800
Break Even = Fixed Cost / Contribution = $ 44,800 / $ 268,800
2)
Break-Even Bicycle Helmets    = Expected sales units x Break Even    = 4,800 x $ 44,800 / $ 268,800	800 Units
Break-Even Motorcycle Helmets    = Expected sales units x Break Even    = 1,920 x $ 44,800 / $ 268,800	320 Units
3)
Head-First Company Contribution Margin Income Statement At Break Even Point
Sales ( 800 x$ 72 ) + ( 320 x $ 210 )	$ 124,800
Less: variable Cost ( 800 x$ 42 ) + ( 320 x $ 145 )	($ 80,000)
Contribution Margin	$ 44,800
Less: Fixed Costs	($ 44,800)
Net Income (or) Loss	$ 0