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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
Variable Cost, Fixed Cost, Contribution Margin Income Statement
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Product costs include:
Variable selling expense is a commission of $3 per helmet; fixed selling and administrative expense totals $29,500.
Required:
- 1. Calculate the total variable cost per unit.
- 2. Calculate the total fixed expense for the year.
- 3. Prepare a contribution margin income statement for Head-First Company for the coming year.
1.
Compute per unit variable cost.
Variable Cost:
Variable cost is the cost which changes with the change in the level of output. In other words, variable cost increases with the increase in units produced and decreases with the decrease in units produced.
Use the following formula to compute the total variable cost per unit:
2.
Compute the total fixed expense for the year.
3.
Make contribution margin income statement for Company H.
Chapter 7 Solutions
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