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 0–1,700 units, and monthly production costs for the production of 1,200 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses.  

Production Costs	Total Cost
Direct materials	$	2,700
Direct labor		7,300
Utilities ($140 fixed)		570
Supervisor’s salary		2,800
Maintenance ($330 fixed)		490
Depreciation		850

Required:

1. Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit (or combination thereof).

2. Determine the total fixed cost per month and the variable cost per unit for Morning Dove.

3. State Morning Dove’s linear cost equation for a production level of 0–1,700 units. Enter answer as an equation in the form of y = a + bx.

4. Calculate Morning Dove’s expected total cost if production increased to 1,400 units per month. Enter answer as an equation in the form of y = a + bx.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit (or combination thereof). (Round your per unit value to 2 decimal places.) Production Costs Behavior Direct Materials per Month Rate per Unit per Unit per Unit Direct labor Utilities per Month per Month per Month Supervisor's Salary per Unit Maintenance per Month per Unit per Unit Depreciation per Month Required 1 Required 2 > Required 1 Required 2 Required 3 Required 4 Determine the total fixed cost per month and the variable cost per unit for Morning Dove. (Round your intermediate calculations and variable cost per unit to 2 decimal places.) Total Variable Cost per Unit Total Fixed Cost per Month < Required 1 Required 3 > Required 1 Required 2 Required 3 Required 4 State Morning Dove's linear cost equation for a production level of 0-1,700 units. Enter answer as an equation in the form of y = a + bx. (Round your intermediate calculations and variable cost per unit to 2 decimal places.) Total Cost < Required 2 Required 4 > Required 1 Required 2 Required 3 Required 4 Calculate Morning Dove's expected total cost if production increased to 1,400 units per month. Enter answer as an equation in the form of y = a + bx. (Round intermediate calculations and variable cost per unit to 2 decimal places.) y < Required 3 Required 4 >

Suppose it sells each birdbath for $30.

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 1,400 units.

Answer 1

1.

Production cost	behavior	Rate
Direct material	Variable	$2.25	per unit
Direct labor	Variable	$6.08	per unit
Utilities	Mixed	$0.36	per unit	$140	per month
Supervisor's salary	Fixed			$2800	per month
Maintenance	Mixed	$0.13	per unit	$330	per month
Depreciation	Fixed			$850	per month

Note 1: calculations of variable cost per unit -

Direct material : per unit cost = $2700/1200 units = $2.25 per unit.

Direct labor : per unit cost = $7300/1200 units = $6.08

Utilities : per unit cost = ($570-$140)/1200 units = $$0.36 per unit.

Maintenance : per unit cost = ($$490-$330)/1200 = $0.13 per unit.

2.

Total variable cost per unit = $8.82

Total fixed cost per month = $4120

Solution :

Total variable cost per unit = $2.25 + $6.08 + $0.36 + $0.13 = $8.82

Total fixed cost per month = $$140+$2800+$330+$850 = $4120

3. Total cost = $4120 + $8.82x.

Solution :

Total variable cost per unit = $8.82 and total fixed cost per month = $4120

Therefore,

Total cost = Fixed cost + variable cost

Total cost = fixed cost + (total variable cost per unit *number of units)

Total cost = $4120 + ($8.82 * x)

Total cost = $4128 + $8.82x

4.

a	+	b	*	x	=	y
$4120	+	$8.82	*	1400	=	$16468

Solution :

Total cost = $4120 + $8.82x

y = $4120 + ($8.82×1400)

y = $4120 + $12348

y = $16468