Question

Head-First Company now sells both bicycle helmets and motorcycle helmets. Next year, Head- First expects to produce total revenue of $570,000 and incur total variable cost of $388,000. Total fixed cost is expected to be $58,900. Required: 1. 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. 2. Check your answer by preparing a contribution margin income statement.

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Head- First expects to produce total revenue of $570,000

The total variable cost of $388,000.

The total fixed cost is expected to be $58,900.

To calculate the break-even point in dollars, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 58,900 / [(570,000 - 388,000) / 570,000]

Break-even point (dollars)= 58,900/0.3193

Break-even point (dollars)= $184,466.02

Contribution margin income statement:

Contribution margin= contribution margin ratio*sales

contribution margin= 0.3193*184,466.02= 58,900

Fixed costs= (58,900)

Net operating profit= 0