# Question & Answer: Head-First Company plans to sell 5,000 bicycle helmets at \$75 each in the coming year. Variable cost is 60% of…..

Head-First Company plans to sell 5,000 bicycle helmets at \$75 each in the coming year. Variable cost is 60% of the sales price: contribution margin is 40% of the sales price. Total fixed cost equals \$49,500 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Head-First must make to break even by using the break-even point in sales equation. 2. Check your answer by preparing a contribution margin Income statement based on the break-even point in sales dollars.

1. Break Even point = Fixed Cost / Contribution Margin Ratio

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=\$ 49,500 / 40%

= \$123,750

2.

 Sales 123,750.00 Less : Variable Cost  (60% * Sales) 74,250.00 Contribution Margin  (40% * Sales) 49,500.00 Less : Fixed Cost 49,500.00 Profit