The following costs result from the production and sale of 4,350 drum sets manuf

Question

The following costs result from the production and sale of 4,350 drum sets manufactured by Tight Drums Company for the ye December 31, 2017. The drum sets sell for $285 each. The company has a 40% income tax rate Variable production costs Plastic for casing Wages of assembly workers Drum stands $104,400 387,150 143,550 Variable selling costs Sales commissions 95,700 Fixed manufacturing costs Taxes on factory Factory maintenance Factory machinery depreciation 13,500 27,000 87,000 Fixed selling and administrative costs Lease of equipment for sales staff Accounting staff salaries Administrative management salaries 27,000 77,000 157,000 Required: 1. Prepare a contribution margin income statement for the company. 2. Compute its contribution margin per unit and its contribution margin ratio. Complete this question by entering your answers in the tabs below

Explanation / Answer

Contribution margin Income Statement: Sales revenue (4350 units @ 285) 1239750 Less: Variable cost Plastic of casing 104400 wages for assembly workers 387150 Drum stands 143550 Sales commission 95,700 Total Variable cost 730800 Contribution Margin   508950 Less: Fixed cost Taxes on factory 13,500 Factory Maintenance 27000 Factory Machinery depreciation 87000 Lease of equipment 27000 Accounting staff salaries 77000 Admin management salsries 157000 Total fixed cost 388500 Net income before tax 120450 Less: Tax @ 40% 48180 Net income after tax 72270 Contribution mrgin income statement Amount Per unit Sales revenue (4350 units @ 285) 1239750 285 Less: Variable cost Plastic of casing 104400 24 wages for assembly workers 387150 89 Drum stands 143550 33 Sales commission 95,700 22 Total Variable cost 730800 168 Contribution margin 508950 117 CM ratio: Contribution margin per unit 117 Divide:Selling price per unit 285 CM ratio: 41.05%

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