Question

Hawk Homes, Inc., makes one type of birdhouse that it sells for $30.50 each. Its variable cost is $14.90 per house, and its fixed costs total $13,494.00 per year. Hawk currently has the capacity to produce up to 2,800 birdhouses per year, so its relevant range is Oto 2,800 houses. Required: 1. Prepare a contribution margin income statement for Hawk assuming it sells 1,260 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 $27,000 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 1,260 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

Part 1	HAWKS HOMES INC.
	Contribution Margin Income Statement
	Sales in units	1260	units
	Sales Revenue(1,260*$30.50)	$         38,430
	Variable expenses(1,260*$14.90)	$         18,774
	Contribution Margin	$         19,656
	Fixed Expenses	$         13,494
	Income from operations	$           6,162
Part 2	At Break-even Point the Total Contribution is equal to total Fixed Cost.
	Hence the Total Contribution at Break-even point is $13,494
Part 3	Sales Price per unit	$           30.50
	Variable cost per unit:	$           14.90
	Contribution margin per unit	$           15.60
	Contribution margin ratio($15.60/$30.50)	51.15%
Part 4	Break-even unit($13,494/$15.60)	865	units
	Break-even Sales($13,494/51.15%)	$    26,381.23
Part 5	Target Net operating Income	$         27,000
	Add:Fixed Costs	$         13,494
	Target Contribution Margin	$         40,494
	Traget Sales($40,494/51.15%)	$    79,167.16
	Target Unit Sales($79,167.16/$30.50)	2596	units