Question

Required information

E5-4 and E5-5 [LO 5-1, 5-5]

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 0–1,800 units, and monthly production costs for the production of 1,500 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses.  

Production Costs	Total Cost
Direct materials	$	2,300
Direct labor		7,900
Utilities ($110 fixed)		610
Supervisor’s salary		3,100
Maintenance ($300 fixed)		540
Depreciation		900

E5-5 (Algo) Calculating Contribution Margin and Contribution Margin Ratio, Preparing Contribution Margin Income Statement [LO 5-5]

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 1,700 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.)

Sales price per unit	-	Variable Cost per Unit	=	Unit Contribution Margin
$22.00					per Birdbath
Unit Contribution Margin	/	Sales price per unit	=	Contribution Margin Ratio
		$22.00			%

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 $22.00 - 7.29 = 14.71 per Birdbath Unit Contribution Margin / Sales price per unit = Contribution Margin Ratio 14.71 / $22.00 66.86 %

Contribution margin income statement

Sales (1700*22)	37400
variable cost (1700*7.29)	12393
Contribution margin	25007
Fixed cost	4410
Operating income	20597