Question

Morning Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0-1900 units, and monthly production costs for the production of 1,400 units follow. Morning Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costs Direct materials Direct labor Utilities ($100 fixed) Supervisor's salary Maintenance (5340 fixed) Depreciation Total Cost $ 2,300 6,900 610 2,500 450 750 E5-5 (Algo) Calculating Contribution Margin and Contribution Margin Ratio, Preparing Contribution Margin Income Statement [LO 5-5) Suppose it sells each birdbath for $28 Required: 1. Calculate the unit contribution margin and contribution margin ratio for each birdbath sold. 2. Complete the contribution margin income statement assuming that Morning Dove produces and sells 1600 units Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the unit contribution margin and contribution margin ratio for each birdbath sold. (Round Variable cost per unit to 2 decimal places. Round your contribution margin ratio to 2 decimal places. Enter all amounts as positive values.) - Unit Contribution Margin per bath Contribution Margin Ratio

Answer 1

1) Calculate following

Choose numerator	-	Choose denominator	=	Contribution margin per unit
Selling price	-	Variable cost	=	Unit contribution margin
28	-	7.01	=	20.99
Choose numerator	/	Choose denominator	=	Contribution margin ratio
Contribution margin	/	Selling price	=	Contribution margin ratio
20.99	/	28	=	74.96%

2) Contribution margin income statement

Sales (1600*28)	44800
Variable cost (1600*7.01)	11216
Contribution margin	33584
Fixed cost	3690
Net operating income	29894