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Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit...

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Accounting

Head-First Company plans to sell 5,000 bicycle helmets at $75each in the coming year. Unit variable cost is $45 (includes directmaterials, direct labor, variable factory overhead, and variableselling expense). Total fixed cost equals $49,500 (includes fixedfactory overhead and fixed selling and administrative expense).

Required:
1.Calculate the number of helmets Head-First must sell to earnoperating income of $81,900.
2.Check your answer by preparing a contribution margin incomestatement based on the number of units calculated.

Answer & Explanation Solved by verified expert
3.8 Ratings (610 Votes)

1

Calculate the number of helmets Head-First must sell to earn operating income of $81,900

Sales

75

100%

Less: variable cost

-45

-60%

Contribution margin

30

40%

number of helmets Head-First must sell to earn operating income of $81,900

=(fixed cost+ desired Income) / Contribution margin per unit

=(49500+81900) /30

=131400 /30

=4380 units

number of helmets Head-First must sell to earn operating income of $81,900 =4380 units

_________________________________________________

2

Check your answer by preparing a contribution margin income statement based on the number of units calculated.

Head-First Company

Contribution Margin Income Statement

Contribution margin income statement

Sales (4380 units 75)

328500

Total variable cost (4380 units 45)

-197100

Total contribution margin

131400

Total fixed cost

-49500

Operating income

81900

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