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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Question
Refer to the list below for the exact wording of an amount description within your income statement.
| Amount Descriptions | |
| Operating income | |
| Operating loss | |
| Sales | |
| Total contribution margin | |
| Total fixed cost | |
| Total variable cost |
Calculate the total variable cost per unit.
Variable cost per unit
Calculate the total fixed expense for the year.
Total fixed expense for the year
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 |
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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