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9 July, 06:52

Head-First Company plans to sell 5,800 bicycle helmets at $76 each in the coming year. Unit variable cost is $44 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,600 (includes fixed factory overhead and fixed selling and administrative expense).

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  1. 9 July, 07:20
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    1. 4,350 helmets

    Explanation:

    1. The computation of the number of helmets is shown below:

    = (Total fixed cost + operating income) : (Contribution margin per unit)

    where,

    Contribution margin per unit = Selling price per unit - Variable cost per unit

    = $76 - $44

    = $32

    So, it would be

    = ($49,600 + $89,600) : ($32)

    = ($139,200) : ($32)

    = 4,350 helmets

    2. The contribution margin income statement is presented below:

    Sales (4,350 * $76) $330,600

    Less: Variable cost (4,350 * $44) ($191,400)

    Contribution margin $139,200

    Less: Total Fixed cost ($49,600)

    Operating income $89,600
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