Question

Hawk Homes, Inc., makes one type of birdhouse that it sells for $30.50 each. Its variable cost is $13.60 per house, and its fixed costs total $14,483.30 per year. Hawk currently has the capacity to produce up to 2,600 birdhouses per year, so its relevant range is 0 to 2,600 houses. Required: 1. Prepare a contribution margin income statement for Hawk assuming it sells 1,220 birdhouses this year. 2. Without any calculations, determine Hawk's total contribution margin if the company breaks even. 3. Calculate Hawk's contribution margin per unit and its contribution margin ratio. 4. Calculate Hawk's break-even point in number of units and in sales revenue. 5. Suppose Hawk wants to earn $23,000 this year. Determine how many birdhouses it must sell to generate this amount of profit. Complete this question by entering your answers in the tabs below. Required 2 Required 3 Required 5 Required 4 Required 1 Prepare a contribution margin income statement for Hawk assuming it sells 1,220 birdhouses this year. (Enter your janswers rounded to 2 decimal places.) HAWK HOMES, INC. Contribution Margin Income Statement Contribution Margin Income from Operations Required 2

Answer 1

Requirement 1 Hawk Homes Inc. Contribution Margin Income Statement Sales Less : Variable Costs Contribution Margin Less : Fixed Cost Income From Operations $ 37,210.00 $ 16,592.00 $ 20,618.00 $ 14,483.30 $ 6,134.70 Requirement 2 Total Unit Contribution Margin $ 14,483.30 Note : Since At Break Even no Profit no loss, So Contribution will equal Fixed cost 30.50 Requirement 3 Selling Price Less : variable cost Unit Contribution margin 13.60 16.90 Contribution Margin Ratio = 16.90/30.50 55.41% Requirement 4 Break Even Units = Fixed cost / unit contribution margin 14483.30/16.90 857.00 Units $ 26,139 Break Even sales= Fixed cost /contribution margin ratio 14483.30/55.41% Requirement 5 Target sales - Fixed cost + Target income / Unit Contribution margin 14483.30+23000/16.90 2218 Units