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 0-2,000 units, and monthly production costs for the production of 1,700 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 ($140 fixed) Supervisor's salary Maintenance ($320 fixed) Depreciation Total Cost $1,500 7,300 640 3,300 470 850 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 1,900 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.) Sales price per unit Variable Cost per Unit = Unit Contribution Margin 28.00 per Birdbath Unit Contribution Margin Sales price per unit = Contribution Margin Ratio %

Answer 1

calculate following

Sales price per unit	-	Variable cost per unit	=	Unit Contribution margin
28	-	9450/1700 = 5.56	=	22.44
Unit Contribution margin	/	Selling price	=	Contribution margin ratio
22.44	/	28	=	80.14%

Contribution margin income statement

Sales (1900*28)	53200
Variable cost (1900*5.56)	10564
Contribution margin	42636
Fixed cost	4610
Net operating income	38026