Morning Dove Company manufactures one model of birdbath, which is very popular.

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 0-2,300 units, and monthly production costs for the production of 1,900 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 ($140 fixed) Supervisor's salary Maintenance (S330 fixed) Depreciation Total Cost $ 2,500 6,900 600 3,300 460 700 Suppose it sells each birdbath for $24 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 = 2. Complete the contribution margin income statement assuming that Morning Dove produces and sells 2,100 units. (Round your intermediate calculation to two decimal place.) MORNING DOVE COMPANY Contribution Margin Income Statement Expected for 2,100 Units Contribution Margin Net Operating Income

Explanation / Answer

CALCULATION OF THE CONTRIBUTION MARGIN / CONTRIBUTION MARGIN RATIO Sales (1900 X $ 24) (A) $                     45,600 Less: Variable Cost Direct Materials $                     2,500 Direct Labour $                     6,900 Utilities ($ 600 - $ 140) $                        460 Maintenance ($ 460- $ 330) $                        130 Total Variable Cost (B) $                       9,990 Contribution Margin (A-B) $                     35,610 total Number of units =                           1,900 units Unit Contribution Margin = contribution Margin / Total Units = $                       18.74 Per unit Contribution Margin Ratio = Contribution Margin / Sales =                         0.7809 Contribution Margin Ratio = Contribution Margin / Sales % = 78.09% MORNING DOVE COMPANY CALCULATION OF THE CONTRIBUTION MARGIN INCOME STATEMENT PARTICULARS AMOUNT AMOUNT Sales (1900 X $ 24) (A) $                     45,600 Less: Variable Cost Direct Materials $                     2,500 Direct Labour $                     6,900 Utilities ($ 600 - $ 140) $                        460 Maintenance ($ 460- $ 330) $                        130 Total Variable Cost (B) $                       9,990 Contribution Margin (A-B) $                     35,610 LESS: FIXED COST Utilities $                        140 Supervisor Salary $                     3,300 Maintenance $                        330 Depreciation $                        700 Total Fixed Cost $                       4,470 Net Operating income $                     31,140

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