Question

E5-3 Calculating Contribution Margin and Contribution Ratio, Preparing Contribution Margin Income Statement [LO 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 0-2,200 units, and monthly production costs for the production of 1.800 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 ($130 fixed) Supervisor's salary Maintenance ($290 fixed) Depreciation Total Cost 1,900 7,700 620 3,300 500 800 Suppose it sells each birdbath for $20. Required: 1. Calculate the unit contribution margin and contribution margin ratio for each birdbath sold. (Round Variable cost per unit to 2 decimal places. Enter all amounts as positive values.) Unit Contribution Margin per Birdbath Contribution Margin Ratio

Answer 1

morning Dove company manufactures producHon = 1800 units I selling po $20 Fixed ost TOTO cost $1900 7700 variable cost $1900 7700 490 Production costs Direct materials Diaect laboa Utilities Supervisor's salary maintenance pepreciation TOTOL 130 3300 290 800 4520 3300 500 800 514820 210 10300 Regi selling price pes unit F 20 variable costp. u= unit contribution margin! I 55.72 $ 14-28 Pes Badba soles P-D contri by Hon margimpul $872 14.28 cm Ratio 714°. =variable cost pes Unites 10300 + 1800 units $ 5.72 PU

Reg2 MORNINGH DOVE COMPANY contribution margin Income statement Expected for 2000 units. Sales [ 2000 units X $ 201 is 40,000 Less Variable cost (2000X 55,42] (1440) contribution margin $ 28560 Less: fixed cost (4520) Het operating Income & 2 4040