Head-First Company now sells both bicycle helmets and motorcycle helmets. Next year, Head- First expects to produce total revenue of $585,000 and incur total variable cost of $372,000. Total fixed cost is expected to be $60,000. 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.

Head-First Company now sells both bicycle helmets and motorcycle helmets. Next year, Head- First expects to produce total revenue of $585,000 and incur total variable cost of $372,000. Total fixed cost is expected to be $60,000. 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.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

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	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.

Similar questions

Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
Required: 1. Complete the following table. 2. Suppose Sandy Bank sells its canoes for $590 each. Calculate the contribution margin per canoe and the contribution margin ratio. 3. This year Sandy Bank expects to sell 760 canoes for $590 each. Prepare a contribution margin income statement for the company. 4. Calculate Sandy Bank's break-even point in units and in sales dollars. Sandy Bank sells its canoes for $590 each. 5. Suppose Sandy Bank wants to earn $76,000 profit this year. Calculate the number of canoes that must be sold to achieve this target. Sandy Bank sells its canoes for $590 each. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the following table. Note: Round your "Cost per Unit" answers to 2 decimal places. Number of Canoes Produced and Sold Total costs Variable Costs Fixed Costs Total Costs Cost per Unit Required 3 Required 4 Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit $ $ $ 500 Required 5 780 0 0.00
Summer Company sells a product with a contribution margin ratio of 54%. Fixed costs per month are $630. What amount of sales (in dollars) must Summer Company have to earn an operating of $6,400? If each unit sells for $25.00, how many units must be sold to achieve the desired operating income?(Round your answers to two decimal places when needed and use rounded answers for all future calculations and write unit answers in whole units when needed.)
Menlo Company distributes a single product. The company’s sales and expenses for last month follows: picture1 Required:1. What is the monthly break-even point in unit sales and in dollar sales?2. Without resorting to computations, what is the total contribution margin at the break-even point?3. How many units would have to be sold each month to earn a target profit of $90,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level.4. Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms.5. What is the company’s CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable expenses are $6 per unit, and fixed expenses total $180,000 annually. Required: Answer the following independent questions: 1. What is the product’s CM ratio? 2. Use the CM ratio to determine the break-even point in sales dollars. 3. The company estimates that sales will increase by $45,000 during the coming year due to increased demand. By how much should net operating income increase? 4. Assume that the operating results for last year were as follows:Sales . . . . . . . . . . . . . . . . . . . . . . . $360,000Variable expenses. . . . . . . . . . . . . 144,000Contribution margin . . . . . . . . . . . . 216,000Fixed expenses . . . . . . . . . . . . . . . 180,000Net operating income . . . . . . . . . . $ 36,000Sales (13,500 units at $20 per unit) . . . . . . . $270,000Variable expenses . . . . . . . . . . . . . . . . . . . . 189,000Contribution margin . . . . . . . . . . . . . . . . . . .…
EXERCISE 5-11 Break-Even Analysis; Target Profit; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7] Pringle Company distributes a single product. The company's sales and expenses for a recent month follow: Total Per Unit Sales ...... $600,000 $40 Variable expenses 420,000 28 Contribution margin . Fixed expenses . Net operating income 180,000 $12 150,000 $ 30,000
Currently, Sweet Treats Bakery sells 1,200 cupcakes per month. The owners would like to increase net income above what is currently earned. Fixed costs are $1,500 per month and their contribution margin is $3 per cupcake. What would be a reasonable net income goal? O $1,800 O $2,600 O $2,100 O $5,600
Shalom Company manufactures socks that sell for P60 each. For the coming year, the management estimates fixed costs to be P200,000 and variable costs to be P45 per unit. 1 What is Shalom Company's contribution margin ratio? 2 If the actual sales during the period was P750,000, did the company earn profit or incur loss? Use the underlined words in capital letters as your choice. 3 If in the following period, Shalom Company wants to earn profit of P180,000, how many units should Shalom Company sell?
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Required:1. What is the monthly break-even point in unit sales and in dollar sales?2. Without resorting to computations, what is the total contribution margin at the break-even point?3. How many units would have to be sold each month to attain a target profit of $90,000? Verify your answer by preparing a contribution format income statement at the target sales level.4. Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms.5. What is the company’s CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
Olongapo Sports Corporation distributes two premium golf balls—the Flight Dynamic and the Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: picture1 Fixed expenses total $183,750 per month. Required:1. Prepare a contribution format income statement for the company as a whole. Carry computations to one decimal place.2. Compute the break-even point for the company based on the current sales mix.3. If sales increase by $100,000 a month, by how much would you expect net operating incometo increase? What are your assumptions?