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Cornerstones of Managerial Accounting 4th Edition by Maryanne Mowen, Don Hansen, Dan Heitger
Edition 4ISBN: 978-0324380767Cornerstones of Managerial Accounting 4th Edition by Maryanne Mowen, Don Hansen, Dan Heitger
Edition 4ISBN: 978-0324380767 Exercise 3
Sales Needed to Earn Target Income
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Variable cost is 60% of the sales price; contribution margin is 40% of the sales price. Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).
Required:
1. Calculate the sales revenue that Head-First must make to earn operating income of $81,900 by using the point in sales equation.
2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Variable cost is 60% of the sales price; contribution margin is 40% of the sales price. Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).
Required:
1. Calculate the sales revenue that Head-First must make to earn operating income of $81,900 by using the point in sales equation.
2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.
Explanation
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1. Calculation of sales to ear...
Cornerstones of Managerial Accounting 4th Edition by Maryanne Mowen, Don Hansen, Dan Heitger
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