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Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $75 and have variable costs of $45 each. The motorcycle helmets are priced at $220 and have variable costs of $140 each. Total fixed cost for Head-First as a whole equals $58,900 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Head-First expects to sell 5,000 bicycle helmets and 2,000 motorcycle helmets.
Required:
Problem 1. Form a package of bicycle and motorcycle helmets based on the sales mix expected for the coming year.
Problem 2. Calculate the break-even point in units for bicycle helmets and for motorcycle helmets.
Problem 3. Check your answer by preparing a contribution margin income statement.
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