Head-Gear Company produces helmets for bicycle racing. Currently, Head-Gear charges a price of $230 per helmet. Variable costs are $80.50 per helmet, and fixed costs are $1,255,800. The tax rate is 25 percent. Last year, 14,000 helmets were sold. Required: 1. What is Head-Gear’s net income for last year? 2. What is Head-Gear’s break-even revenue? (Round to the nearest dollar.) 3. Suppose Head-Gear wants to earn before-tax operating income of $900,000. How many units must be sold? (Round to the nearest unit.) 4. Suppose Head-Gear wants to earn after-tax net income of $650,000. How many units must be sold? (Round to the nearest unit.) 5. Suppose the income tax rate rises to 35 percent. How many units must be sold for Head-Gear to earn after-tax income of $650,000? (Round to the nearest unit.)

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
BuyFind

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Solutions

Chapter 16, Problem 16E
Textbook Problem

Head-Gear Company produces helmets for bicycle racing. Currently, Head-Gear charges a price of $230 per helmet. Variable costs are $80.50 per helmet, and fixed costs are $1,255,800. The tax rate is 25 percent. Last year, 14,000 helmets were sold.

Required:

  1. 1. What is Head-Gear’s net income for last year?
  2. 2. What is Head-Gear’s break-even revenue? (Round to the nearest dollar.)
  3. 3. Suppose Head-Gear wants to earn before-tax operating income of $900,000. How many units must be sold? (Round to the nearest unit.)
  4. 4. Suppose Head-Gear wants to earn after-tax net income of $650,000. How many units must be sold? (Round to the nearest unit.)
  5. 5. Suppose the income tax rate rises to 35 percent. How many units must be sold for Head-Gear to earn after-tax income of $650,000? (Round to the nearest unit.)

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Chapter 16 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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