Sales Needed to Earn Target Income Head-First Company plans to sell 4,764 bicycl

Question

Sales Needed to Earn Target Income Head-First Company plans to sell 4,764 bicycle helmets at $75 each in the coming year. Variable cost is 60 percent of the sales price; contribution margin is 40 percent of the sales price. Total fixed cost equals $51,500 (includes fixed factory overhead and fixed selling and administrative expense). Calculate the sales revenue that Head-First must make to earn operating income of $81,900. Round your answer to the nearest dollar. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1. If required, round your answers to nearest whole value.

Explanation / Answer

Head-First company Details a Contribution Margin 40% b Total Fixed cost                51,500 c Traget Operating Income                81,900 d Required Contribution =b+c=              133,400 e Required sales Revenue =d/a              333,500 Check Contribution Margin Income Statement Details Amt Sale Revenue              333,500 Less : Variable cost @60%              200,100 Contribution=              133,400 Less : Fixed costs                51,500 Net Operating Income                81,900

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