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 0-1500 units, and monthly production costs for the production of 100 units follow. Morning Dove's utilities and maintenance costs are moved with the fixed components shown in parentheses Production Costs Direct materials Direct labor Utilities ($130 Fixed) Supervisor's salary Maintenance (5330 fixed) Depreciation Total Cast $ 2.300 7. 10 550 2, see

Answer 1

Ans:

1)

Given production costs for 1,100 units

Variable costs:

Direct material = $2,300

Direct labour = $7,300

Utilities (var) = $420 (i.e., 550 - 130)

Maintenance (var) = $180 (i.e., 510 - 330)

Total variable costs = $10,200

Variable cost per unit = $10,200/1,100 units

= $9.27

Variable cost per unit = $9.27

Selling price per unit = $28

Contribution margin per unit = $18.73 (i.e., 28 - 9.27)

Contribution margin ratio = (Unit contribution margin/selling price)*100

Contribution margin ratio = (18.73/28)*100

= 66.89%

Unit contribution margin	$18.73
Contribution margin ratio	66.89%

Fixed costs:

Utilities = $130

Supervisor salary = $2,900

Maintenance = $330

Depreciation = $750

Total fixed costs = $4,110

2)

Morning dove company
Contribution margin income statement
Expected for 1,300 units
Particulars		Amount $
Sales	(1,300*28)	36,400
Less: Variable cost	(1,300*9.27)	(12,051)
Contribution margin		24,349
Less: Fixed cost		(4,110)
Net operating income		20,239

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