Break-Even Point in Units Head-First Company plans to sell 5,000 bicycle helmets

Question

Break-Even Point in Units 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). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Calculate the break-even number of helmets. Check your answer by preparing a contribution margin income statement based on the break-even units. If amount is zero, enter "0".

Explanation / Answer

1. Break Even No Of Helmets = Fixed / Contribution per unit = $ 49500 / 30 = 1650 helmets

Contribution per unit = Sales Price - Variable Cost per Unit = $ 75 - $ 45 = $ 30

b ) Contribution Margin Income statement at Break Even Point :

Sales = 1650 helmets * $ 75 = $ 123,750

Variable Cost = 1650 helmets * $ 45 = $ 74,250

Contribution Margin = $ 49,500 ( Sales- Variable Cost )

Less : Fixed Expenses = $ 49,500

Net Income = 0

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