Hawk Homes, Inc., makes one type of birdhouse that it sells for $29.90 each. Its

Question

Hawk Homes, Inc., makes one type of birdhouse that it sells for $29.90 each. Its variable cost is $14.30 per house, and its fixed costs total $13,478.40 per year. Hawk currently has the capacity to produce up to 2,500 birdhouses per year, so its relevant range is 0 to 2,500 houses. Required: 1. Prepare a contribution margin income statement for Hawk assuming it sells 1,100 birdhouses this year. (Enter your answers rounded to 2 decimal places.) 2. Without any calculations, determine Hawk’s total contribution margin if the company breaks even. (Enter your answers rounded to 2 decimal places.) 3. Calculate Hawk’s contribution margin per unit and its contribution margin ratio. (Round your answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.)) 4. Calculate Hawk’s break-even point in number of units and in sales revenue. (Round your "Sales Revenue" answer to 2 decimal places and "Unit" answer to the nearest whole number.) 5. Suppose Hawk wants to earn $29,000 this year. Determine how many birdhouses it must sell to generate this amount of profit. (Round up to the next whole number.)

1.

2. total contribution margin =

3. Unit contribution margin =

Contribution Margin Ratio =

4. Break Even Units =

Break Even Sales Revenue =

5. Target Unit Sales

HAWK HOMES, INC. Contribution Margin Income Statement Contribution Margin Income from Operations

Explanation / Answer

Answer 1 Hawk Homes, Inc.   

Contribution Margin Income Statement   

Answer 2

Note : At break even point since the profit is zero that means Total Contribution = Total Fixed Cost

Total Contribution Margin at break even point = $13,478.40

Answer 3

Contribution margin per unit = Selling price per unit - Variable cost per unit

= $29.90 - 14.30 = $15.60

Contribution margin ratio = (Contribution per unit / Selling price per unit )

$15.60 / $29.90 = 52.17 %

Answer 4

Break Even Point in (units) = Total Fixed Cost / Contribution per unit

= $13,478.40 / $15.60 = 864 units

Break Even Point in (Sales) = Break Even Point in (units) * Slling price per unit

= 864 units * $29.90 = $2,5833.60

Answer 5

Target Profit = $29,000

Total Contribution = Total Fixed Cost + Target Profit

= $13,478.40 + $29,000 = $42,478.40

Target Unit Sales = Total Contribution / Contribution per unit

$42,478.40 / $15.60 = 2,723 units

Details Amount ($) Sales (1,100 * 29.90 ) 32,890 Less : Variable Cost (1 ,100 * $14.30 15.730 Total Contribution Margin 17,160 Less : Fixed Cost 13,478.40 Income from Operation 3,681.60

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