Question 1 Suppose that Head-First Company now sells both bicycle helmets and motorcycle...

Question:

Question 1

Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $74 and have variable costs of $48 each. The motorcycle helmets are priced at $215 and have variable costs of $130 each. Total fixed cost for Head-First as a whole equals $60,000 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 4,850 bicycle helmets and 1,940 motorcycle helmets.

Refer to the list below for the exact wording of text items within your income statement.

Amount
Descriptions
Operating income
Operating loss
Sales
Total contribution margin
Total fixed expense
Total variable expense

1. From a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.

Product Price Unit
Variable
Cost
Unit
Contribution
Margin
Sales
Mix
Package
Contribution
Margin
Bicycle helmet
Motorcycle helmet
Package total

2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.

Break-Even Bicycle Helmets: _____
Break-Even Motorcycle Helmets: _____

Check your answer by preparing a contribution margin income statement.

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 At Break-Even Sales Dollars
1
2
3
4
5


Question 2

Head-First Company now sells both bicycle helmets and motorcycle helmets. Next year, Head- First expects to produce total revenue of $575,000 and incur a total variable cost of $400,000. Total fixed cost is expected to be $60,500. Refer to the list below for the exact wording of text items within your income statement.

Amount
Descriptions
Operating income
Operating loss
Sales
Total contribution margin
Total fixed expense
Total variable expense

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. | The break-even point in sales equals | _____

Check your answer by preparing a contribution margin income statement.

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 At Break-Even Sales Dollars
1
2
3
4
5

Methods for Costing:

There are many methods have been developed for finding the cost of goods produced i.e. traditional costing method, absorption-based costing, and variable costing. Each method has different uses which are applied according to the production process developed by the companies.

Answer and Explanation:

1. Computation for Income (Loss)
Particulars Bicycle Helmet Motorcycle Helmet Total
Units (a) 4,850 1,940 6,790
Per Unit Selling Price $74 $215
Less: variable Cost $(48) $(130)
Contribution Margin $26 $85
Total Contribtuion Margin $126,100 $164,900 $291,000
Less: Fixed Cost $(60,000)
Net Income $231,000


Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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