Question

Required information E5-4 and E5-5 [LO 5-1, 5-5) 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 0-1,900 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 ($340 fixed) Depreciation Total Cost $2,300 6,900 610 2.500 450 550 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 1,600 units. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the contribution margin income statement assuming that Morning Dove produces and sells 1,600 units. (Round your intermediate calculation to 2 decimal places.) Prey 1 of 1 !!! Next >

Answer 1

Unit contribution Margin = Unit selling price – unit variable cost

= 28-(2300+6900+510+110)/1400

= $20.99 per unit

Contribution Margin Ratio = Contribution Margin/Sales

= 20.99/28

= 74.96%

Contribution Margin Income Statement
Sales 1600*28	44,800
Variable costs 1600*7.01	11,216
Contribution Margin	33,584
Fixed costs	3,690
Net Operating income	29,894