Question

Required information 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 0-2,000 units, and monthly production costs for the production of 1,500 units follow. Morning Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costs Total Cost Direct materials $2,300 Direct labor 6,900 Utilities ($120 fixed) 570 Supervisor's salary 3,200 Maintenance ($330 fixed) 530 Depreciation 900 Suppose it sells each birdbath for $20. 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 1,700 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 Birdbath = Contribution Margin Ratio ( Required 1 Required 2 >

Answer 1

1) Calculate following

Selling price per unit	-	Variable cost per unit	=	Unit contribution margin
20	-	6.57	=	13.43
Contribution margin per unit	/	Selling price per unit	=	Contribution margin ratio
13.43	/	20	=	67.15%

Contribution margin income statement

Sales (1700*20)	34000
variable cost (1700*6.57)	11169
Contribution margin	22831
Fixed cost	4550
Net income	18281