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 1,500 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 ($300 fixed) Depreciation Total Cost $2,300 7,700 600 2,600 510 750 E5-5 (Algo) Calculating Contribution Margin and Contribution Margin Ratio, Preparing Contribution Margin Income Statement [LO 5-5) Suppose it sells each birdbath for $22. 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 1700 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.)

Answer 1

1)	Selling price per unit		-	Variable cost per unit		=	Unit contribution margin
	22		-	7.11		=	14.89	per Birdbath
	contribution margin per unit		-	selling price per unit		=	Contribution margin ratio
	14.89		-	22.00		=	68%
2)	Contribution Margin Income Statement
	Sales				37400
	Variable cost				12093
	Contribution margin				25307
	Fixed costs				3,790
	Net Operating income				21,517

Working notes

1)	production costs		Behaviour	Rate
	Direct materials		variable	1.53	per unit		per month
	Direct labor		variable	5.13	per unit		per month
	Utilities		Mixed	0.31	per unit	140	per month
	supervisor's salary		Fixed		per unit	2,600	per month
	Maintenance		Mixed	0.14	per unit	300	per month
	Depreciation		Fixed		per unit	750	per month
2)	Total variable cost per unit			7.11
	total fixed cost per unit			3,790