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
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 to 1,500 units, and monthly production costs for the production of 500 units follow. Morning Doves utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costs Total Cost Direct materials $ 1,500 Direct labor 7,500 Utilities ($100 fixed) 650 Supervisors salary 3,000 Maintenance ($280 fixed) 480 Depreciation 800 Suppose it sells each birdbath for $25. Required: Calculate the unit contribution margin and contribution margin ratio for each birdbath sold. Complete the contribution margin income statement assuming that Morning Dove produces and sells 1,400 units.
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