Question

Required information 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 0-1,500 units, and monthly production costs for the production of 1,000 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 ($110 fixed) Supervisor's salary Maintenance ($280 fixed) Depreciation Total Cost $1,900 6.900 600 2,800 450 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 1,200 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

Correct Answer:

Contribution margin ratio

66.21%

Working:

	Per Unit	Total at 1000 units
Sales	$    28.00	$ 28,000.00
Less: Variable Costs
Direct material	$       1.90	$     1,900.00
Direct labour	$       6.90	$     6,900.00
Utilities	$       0.49	$        490.00
Maintenance	$       0.17	$        170.00
Total Variable Cost	$       9.46	$     9,460.00
Contribution margin	$    18.54	$ 18,540.00
Contribution margin ratio		66.21%

Requirement 2:

MORNING DOVE COMPANY
Contribution Margin Income Statement
Expected for 1200 Units
Sales Revenue	$            33,600.00
Less: Variable Cost
Direct material	$             2,280.00
Direct labour	$             8,280.00
Utilities	$                588.00
Maintenance	$                204.00
Total Variable Cost	$            11,352.00
Contribution Margin	$            22,248.00
Fixed Costs
Utilities	$                110.00
Supervisor's Salary	$             2,800.00
Maintenance	$                280.00
Depreciation	$                750.00
Total Fixed cost	$             3,940.00
Net Operating Income	$            18,308.00

End of answer.

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