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 0–2,400 units, and monthly production costs for the production of 2,000 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses.

Production Costs

Total Cost

Direct materials

$

2,100

Direct labor

7,300

Utilities ($120 fixed)

650

Supervisor’s salary

2,800

Maintenance ($280 fixed)

520

Depreciation

800

Suppose it sells each birdbath for $26.

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.)

Sales Price

-

Variable Cost per Unit

=

Unit Contribution Margin

$26.00

per Birdbath

Unit Contribution Margin

/

Sales Price

=

Contribution Margin Ratio

%

2. Complete the contribution margin income statement assuming that Morning Dove produces and sells 2,200 units. (Round your intermediate calculation to two decimal place.)

MORNING DOVE COMPANY

Contribution Margin Income Statement

Expected for 2,200 Units

Sales Revenue

$57,200

Variable Costs

Contribution Margin

Fixed Costs

Net Operating Income

Production Costs

Total Cost

Direct materials

$

2,100

Direct labor

7,300

Utilities ($120 fixed)

650

Supervisor’s salary

2,800

Maintenance ($280 fixed)

520

Depreciation

800

xed componens Siopese it sels each c birdbath for Calculate the unit conbution magin and conibution margin ratio for each birdbath sold (Round Variable cost per unit to 2 decimal places.Enter l ounts as positive valuss 2. Complate the contrybution margin income staement assuming that Moming Dove produces and sels 2.200 unibs (Round your inernedate calculation to two decimal place

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Variable costs: Direct materials                        2,100.00 Direct labour                        7,300.00 Utilities = 650 - 120                            530.00 Maintenance = 520 - 280                            240.00 Total Variable costs                      10,170.00 VC per unit = 10170/2000                                5.09 Sales price - Variable cost per unit = Unit contribution margin 26 - 5.09 = Unit contribution margin Unit contribution margin = 20.91 Unit Contribution Margin /Sales Price = Contribution Margin Ratio 20.91/26 = Contribution Margin Ratio Contribution Margin Ratio = 80.42% MORNING DOVE COMPANY Contribution Margin Income Statement Expected for 2,200 Units Paticulars Amount Sales                      57,200.00 Less Variable Expenses Direct materials = 2100/2000*2200                        2,310.00 Direct labour = 7300/2000*2200                        8,030.00 Utilities 530/2000*2200                            583.00 Maintenance = 240/2000*2200                            264.00 Total Variable cost                      11,187.00 Contribution Margin                      46,013.00 Fixed cost : Utilities                            120.00 Supervisor’s salary                        2,800.00 Maintenance                               280.00 Depreciation                            800.00 Total Fixed costs                        4,000.00 Net operating income                      42,013.00

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