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 years.
Problem 1: Variable Cost, Fixed Cost, Contribution Margin Income Statement
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
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 years.
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