Question

Hawk Homes, Inc., makes one type of birdhouse that it sells for $29.80 each. Its variable cost is $14.30 per house, and its fixed costs total $13,376.50 per year. Hawk currently has the capacity to produce up to 2,900 birdhouses per year, so its relevant range is 0 to 2,900 houses.

Required:
1. Prepare a contribution margin income statement for Hawk assuming it sells 1,180 birdhouses this year. (Enter your answers rounded to 2 decimal places.)

	HAWK HOMES, INC. Contribution Margin Income Statement Sales Revenue Variable Costs Contribution Margin Fixed Costs Income from Operations

2. Without any calculations, determine Hawk’s total contribution margin if the company breaks even. (Enter your answers rounded to 2 decimal places.)

	Total Contribution Margin

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%.))

	Unit Contribution Margin Contribution Margin Ratio %

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.)

	Break-Even Units Units Break-Even Sales Revenue

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.)

	Target Unit Sales Units

Answer 1

• All working forms part of the answer
• Amounts are in $
• Working column is provided for calculation
• Requirement 1

Working		Units	per unit ($)	Amount ($)
A	Sales revenue	1180	29.8	35164
B	Variable costs	1180	14.3	16874
C=A-B	Contribution margin	1180	15.5	18290
D	Fixed Cost			13376.5
E=C-D	Income from operations			4913.5

• Requirement 2

At Break Even, contribution margin equals fixed cost.

Hence, Hawk's total contribution margin will be $13376.5

• Requirement 3

A	Total contribution margin	18290
B	Total Units	1180
C=A/B	Contribution per unit	15.5
D	Sale price per unit	29.8
E=C/D	Contribution margin ratio	52.01%

• Requirement 4

A	Fixed Cost	13376.5
B	Contribution per unit	15.5
C=A/B	Break Even point in Units	863
D	Contribution margin ratio	52.01%
E=A/D	Break Even in sales revenue	$25719.09

• Requirement 5

A	Target profit	29000
B	Fixed Cost	13376.5
C=A+B	Total contribution margin required	42376.5
D	Contribution per unit	15.5
E=C/D	Units required to be sold	2734 units