Head-First Company plans to sell 4,200 bicycle helmets at $67 each in the coming year. Variable...
Head-First Company plans to sell 4,200 bicycle helmets at $67 each in the coming year. Variable cost is 66% of the sales price; contribution margin is 34% of the sales price. Total fixed cost equals $42,585 (includes fixed factory overhead and fixed selling and administrative expense).
Required: 1. Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation.
2. Check your answer by preparing a contribution margin income statement based on the break-even point in sales dollars.
Homework Answers
1.
Breakeven sales = $42,585 / 34% = $125,250
2.
| Sales | $125,250 |
| Less: Variable cost ($125,250 X 66%) | $82,665 |
| Contribution margin | $42,585 |
| Fixed cost | $42,585 |
| Net operating income | $0 |
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