Break-Even Point in Units
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).
Required:
1.
Compute the break-even number of helmets.
Break-Even Point:
Break-even point refers to the point where total cost is equal to total revenue. The profit is equal to zero at the breakeven point. Break-even point is calculated in units or sales.
Use the following formula to compute the break-even number:
Substitute $49,500 for total fixed cost, $75 for price and $45 for unit variable cost
2.
Prepare the contribution margin income statement of Company H for 1,650 helmets.
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