Question

Hawk Homes, Inc., makes one type of birdhouse that it sells for $30.00 each. Its variable cost is $14.10 per house, and its fixed costs total $13,864.80 per year. Hawk currently has the capacity to produce up to 2,900 birdhouses per year, so its relevant range is Oto 2,900 houses. Required: 1. Prepare a contribution margin income statement for Hawk assuming it sells 1,110 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 $29,000 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 1 Required 2 Required 3 Required 4 Required 5 Prepare a contribution margin income statement for Hawk assuming it sells 1,110 birdhouses this year. (Enter your answers rounded to 2 decimal places.) HAWK HOMES, INC. Contribution Margin Income Statement Contribution Margin Income from Operations

Answer 1

Ans. 1	HAWK HOMES, INC.
	Contribution Margin   Income Statement
		Total
	Sales (1,110 * $30)	$33,300.00
	Variable expenses (1,110 * $14.10)	-$15,651.00
	Contribution margin	$17,649.00
	Fixed expenses	-$13,864.80
	Net operating income	$3,784.20
Ans. 2	On the point of break even, the company's contribution margin is equal to its fixed
	cost because on the break even level of sales the operating income of
	company becomes zero and operating income is the difference between
	contribution margin and fixed cost.
	Contribution margin = $13,864.80
Ans. 3	Contribution margin per unit = Selling price per unit - Variable cost per unit
	$30 - $14.10
	$15.90	per unit
	Contribution margin ratio = Contribution margin per unit / Selling price per unit * 100
	$15.90 / $30 * 100
	53.00%
Ans. 4	Break even point in unit sales =   Fixed cost / Contribution margin per unit
	$13,864.80 / $15.90
	872 units
	Break even point in dollar sales =   Break even in units * Selling price per unit
	872 * $30
	$26,160.00
Ans. 5	Sales units for target profit   =    (Fixed cost + Target profit) / Contribution margin per unit
	($13,864.80 + $29,000) / $15.90
	$42,864.80 / $15.90
	2695.90	units