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19 July, 06:54

Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Product costs include: Direct materials per helmet $ 30 Direct labor per helmet 8 Variable factory overhead per helmet 4 Total fixed factory overhead 20,000 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.

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  1. 19 July, 07:40
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    Instructions are listed below.

    Explanation:

    Giving the following information:

    Sales = 5,000 units

    Selling price = $75

    Product costs include:

    Direct materials per helmet = $30

    Direct labor per helmet = $8

    Variable factory overhead per helmet = $4

    Total fixed factory overhead 20,000

    Variable selling expense is a commission of $3 per helmet

    The fixed selling and administrative expense totals $29,500

    The total variable cost is calculated as follow:

    Total variable cost = unitary variable cost*number of units

    Unitary variable cost = direct material + direct labor + variable overhead + variable selling and administrative

    Total variable cost = (30 + 8 + 4 + 3) * 5,000 = $225,000

    Total fixed costs = 20,000 + 29,500 = $49,500

    Income statement:

    Sales = 5,000*75 = 375,000

    Total variable cost = (225,000)

    Contribution margin = 150,000

    Total fixed factory overhead = (20,000)

    The fixed selling and administrative expense = (29,500)

    Net operating income = $100,500
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