Break-Even Point in Units for a Multiple-Product Firm Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $75 and have variable costs of $45 each. The motorcycle helmets are priced at $220 and have variable costs of $140 each. Total fixed cost for Head-First as a whole equals $58,900 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 5,000 bicycle helmets and 2,000 motorcycle helmets. Required: 1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year. 2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets. 3. Check your answer by preparing a contribution margin income statement.

BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter 7, Problem 19BEA
Textbook Problem

Break-Even Point in Units for a Multiple-Product Firm

Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $75 and have variable costs of $45 each. The motorcycle helmets are priced at $220 and have variable costs of $140 each. Total fixed cost for Head-First as a whole equals $58,900 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 5,000 bicycle helmets and 2,000 motorcycle helmets.

Required:

  1. 1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.
  2. 2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.
  3. 3. Check your answer by preparing a contribution margin income statement.

Expert Solution

Want to see the full answer?

Check out a sample textbook solution.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Chapter 7 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 7 - Explain how a change in sales mix can change a...Ch. 7 - Define the term margin of safety. Explain how it...Ch. 7 - Explain what is meant by the term operating...Ch. 7 - How can sensitivity analysis be used in...Ch. 7 - Why is a declining margin of safety over a period...Ch. 7 - If the variable cost per unit goes down,Ch. 7 - The amount of revenue required to earn a targeted...Ch. 7 - Break-even revenue for the multiple-product firm...Ch. 7 - In the cost-volume-profit graph, a. the break-even...Ch. 7 - An important assumption of cost-volume-profit...Ch. 7 - The use of fixed costs to extract higher...Ch. 7 - If the margin of safety is 0, then a. the company...Ch. 7 - The contribution margin is the a. amount by which...Ch. 7 - Dartmouth Company produces a single product with a...Ch. 7 - Dartmouth Company produces a single product with a...Ch. 7 - If a companys total fixed cost decreases by...Ch. 7 - Solemon Company has total fixed cost of 15,000,...Ch. 7 - Variable Cost, Fixed Cost, Contribution Margin...Ch. 7 - Break-Even Point in Units Head-First Company plans...Ch. 7 - Variable Cost Ratio, Contribution Margin Ratio...Ch. 7 - Break-Even Point in Sales Dollars Head-First...Ch. 7 - Units to Earn Target Income Head-First Company...Ch. 7 - Sales Needed to Earn Target Income Head-First...Ch. 7 - Break-Even Point in Units for a Multiple-Product...Ch. 7 - Break-Even Sales Dollars for a Multiple-Product...Ch. 7 - Margin of Safety Head-First Company plans to sell...Ch. 7 - Degree of Operating Leverage Head-First Company...Ch. 7 - Impact of Increased Sales on Operating Income...Ch. 7 - Variable Cost, Fixed Cost, Contribution Margin...Ch. 7 - Break-Even Point in Units Chillmax Company plans...Ch. 7 - Variable Cost Ratio, Contribution Margin Ratio...Ch. 7 - Break-Even Point in Sales Dollars Chillmax Company...Ch. 7 - Units to Earn Target Income Chillmax Company plans...Ch. 7 - Sales Needed to Earn Target Income Chillmax...Ch. 7 - Suppose that Chillmax Company now sells both pairs...Ch. 7 - Break-Even Sales Dollars for a Multiple-Product...Ch. 7 - Margin of Safety Chillmax Company plans to sell...Ch. 7 - Degree of Operating Leverage Chillmax Company...Ch. 7 - Impact of Increased Sales on Operating Income...Ch. 7 - Basic Break-Even Calculations Suppose that Larimer...Ch. 7 - Price, Variable Cost per Unit, Contribution...Ch. 7 - Contribution Margin Ratio, Variable Cost Ratio,...Ch. 7 - Income Statement, Break-Even Units, Units to Earn...Ch. 7 - Units Sold to Break Even, Unit Variable Cost, Unit...Ch. 7 - Margin of Safety Comer Company produces and sells...Ch. 7 - Contribution Margin, Unit Amounts, Break-Even...Ch. 7 - Sales Revenue Approach, Variable Cost Ratio,...Ch. 7 - Cherry Blossom Products Inc. produces and sells...Ch. 7 - Cherry Blossom Products Inc. produces and sells...Ch. 7 - Texas-Q Company produces and sells barbeque...Ch. 7 - Lotts Company produces and sells one product. The...Ch. 7 - Klamath Company produces a single product. The...Ch. 7 - Margin of Safety and Operating Leverage Medina...Ch. 7 - Parker Pottery produces a line of vases and a line...Ch. 7 - Jellico Inc.s projected operating income (based on...Ch. 7 - Break-Even Units, Contribution Margin Ratio,...Ch. 7 - Break-Even Units, Operating Income, Margin of...Ch. 7 - Aldovar Company produces a variety of chemicals....Ch. 7 - Basu Company produces two types of sleds for...Ch. 7 - Cost-Volume-Profit Equation, Basic Concepts,...Ch. 7 - Contribution Margin Ratio, Break-Even Sales,...Ch. 7 - Carlyle Lighting Products produces two different...Ch. 7 - Polaris Inc. manufactures two types of metal...Ch. 7 - Cost-Volume-Profit, Margin of Safety Victoria...Ch. 7 - Abraham Company had revenues of 830,000 last year...Ch. 7 - Solve the following independent problems....Ch. 7 - Candyland Inc. produces a particularly rich...Ch. 7 - Income statements for two different companies in...Ch. 7 - Suppose that Kicker had the following sales and...Ch. 7 - Danna Lumus, the marketing manager for a division...Ch. 7 - Cost-Volume-Profit Analysis, Single-Product...Ch. 7 - Cost-Volume-Profit Analysis, Single-Product...Ch. 7 - The hotels accounting system data show an average...Ch. 7 - Cost Classification a. Classify the manufacturing...Ch. 7 - Sensitivity Cost-Volume-Profit Analysis and...Ch. 7 - Calculate the hotels margin of safety (both in...

Additional Business Textbook Solutions

Find more solutions based on key concepts
For a stock to be in equilibrium, what two conditions must hold?

Fundamentals of Financial Management (MindTap Course List)

How can report writers ensure that they present their topics objectively and credibly?

Essentials of Business Communication (MindTap Course List)

List and describe four determinants of a countrys productivity.

Principles of Economics (MindTap Course List)

(Costs in the Short Run) Identify each of the curves in the following graph:

ECON: MICRO4 (New, Engaging Titles from 4LTR Press)

COST OF EQUITY WITH AND WITHOUT FLOTATION Javits Sons common stock currently trades at 30.00 a share. It is ex...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Describe service-oriented architecture (SOA).

Pkg Acc Infor Systems MS VISIO CD