Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year

Accounting Aug 21, 2020

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). Required: Calculate the break-even number of helmets.

Expert Solution

Computation of the break-even number of helmets:-

Contribution margin per helmet = Selling price per helmet - Variable cost per helmet

= $75 - $45

= $30 per helmet

Break even number of helmets = Total fixed cost / Contribution margin per helmet

= $49,500 / $30

= 1,650 helmets

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