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.)