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 0–1,700 units, and monthly production costs for the production of 1,400 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses.  

Production Costs	Total Cost
Direct materials	$	1,700
Direct labor		7,900
Utilities ($120 fixed)		640
Supervisor’s salary		3,300
Maintenance ($290 fixed)		530
Depreciation		750

Suppose it sells each birdbath for $28.

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 1,600 units.

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.)

	Sales price per unit Variable Cost per Unit = Unit Contribution Margin $28.00 per Birdbath Unit Contribution Margin Sales price per unit = Contribution Margin Ratio %

Complete the contribution margin income statement assuming that Morning Dove produces and sells 1,600 units. (Round your intermediate calculation to 2 decimal places.)

	MORNING DOVE COMPANY Contribution Margin Income Statement Expected for 1,600 Units Sales Revenue $44,800 Variable Costs Contribution Margin Fixed Costs Net Operating Income

Answer 1

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.)

	Sales price per unit Variable Cost per Unit = Unit Contribution Margin $28.00 7.4 = 20.60 per Birdbath Unit Contribution Margin Sales price per unit = Contribution Margin Ratio 20.60 / 28 = 73.57 %

Complete the contribution margin income statement assuming that Morning Dove produces and sells 1,600 units. (Round your intermediate calculation to 2 decimal places.)

	MORNING DOVE COMPANY Contribution Margin Income Statement Expected for 1,600 Units Sales Revenue $44,800 Variable Costs (1600*7.4) 11840 Contribution Margin 32960 Fixed Costs 4460 Operating income 28500 Net Operating Income