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Question: How do I calculate variable cost per unit when I have mixed costs?
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 0-2,000 units, and monthly production costs for the production of 1,600 units follow. Morning Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses.
Production Costs Total cost Direct materials $ 2,700 Direct labor 7,500 Utilities ($130 fixed) 590 Supervisor's salary 3,400 Maintenance ($290 fixed) 490 Depreciation 750
Suppose it sells each birdbath for $20.
Required:
1. Calculate the unit contribution margin and contribution margin ratio for each birdbath sold. (Round your answers to 2 decimal places.)
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