Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is $20,000 and fixed selling and administrative expense is $29,500. Required:1.Calculate the variable cost ratio.2.Calculate the contribution margin ratio.3.Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin. Calculate the variable cost ratio.Variable cost ratio Calculate the contribution margin ratio.Contribution margin ratio Refer to the list below for the exact wording of text items within your income statement.Amount Descriptions Operating income Operating loss Sales Total contribution margin Total fixed cost Total variable cost

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Description: Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is $20,000 and

Income Statement: Under this Statement showing the company’s performance over a period of time by…

Answered: Head-First Company plans to sell 5,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is $20,000 and fixed selling and administrative expense is $29,500.

	Required:
1.	Calculate the variable cost ratio.
2.	Calculate the contribution margin ratio.
3.	Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin.

Calculate the variable cost ratio.

Variable cost ratio

Calculate the contribution margin ratio.

Contribution margin ratio

Refer to the list below for the exact wording of text items within your income statement.

Amount Descriptions
Operating income
Operating loss
Sales
Total contribution margin
Total fixed cost
Total variable cost

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