Have problems with the steps on how to solve this problem. Contribution margin i

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Have problems with the steps on how to solve this problem.

Contribution margin income statement and contribution margin ratio.

The following costs result from the production and sale of 4,950 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $345 each. The company has a 40% income tax rate.

Variable production costs    

     Plastic for casing $ 178,200  

     Wages of assembly workers   499,950  

     Drum stands   222,750  

Variable selling costs    

     Sales commissions   168,300  

Fixed manufacturing costs    

     Taxes on factory    5,500  

     Factory maintenance   11,000  

     Factory machinery depreciation   71,000  

Fixed selling and administrative costs    

     Lease of equipment for sales staff   11,000  

     Accounting staff salaries   61,000  

     Administrative management salaries   141,000  

Prepare a contribution margin income statement for the company.

TOM THOMPSON COMPANY

Contribution Margin Income Statement

For Year Ended December 31, 2013

Sales

$

Variable Cost

$

$

$

$

$

Total variable cost

Contribution margin

$

Fixed costs

$

$

$

$

$

$

Total fixed costs

$

$

Compute its contribution margin per unit

TOM THOMPSON COMPANY

Contribution Margin Income Statement (partial)

For Year Ended December 31, 2013

Per Unit

Sales

$

Variable costs

$

$

$

$

$

Total variable costs

Contribution margin

$

$

$

TOM THOMPSON COMPANY

Contribution Margin Income Statement

For Year Ended December 31, 2013

Explanation / Answer

TOM THOMPSON COMPANY

TOM THOMPSON COMPANY Contribution Margin Income Statement For Year Ended December 31, 2013 Sales    4950*345 1707750 Less: Variable costs      Plastic for casing    178200      Wages of assembly workers      499950 Drum stands 222750      Sales commissions      168300 Total Variable costs 1069200 Contribution Margin 638550 Less:Fixed costs Fixed manufacturing costs          Taxes on factory       5500      Factory maintenance   11000      Factory machinery depreciation   71000 Fixed selling and administrative costs          Lease of equipment for sales staff   11000      Accounting staff salaries      61000      Administrative management salaries   141000 Total Fixed costs 300500 Net Income before tax 338050 Less: Tax @ 40% 135220 Net Income after tax 202830 Contribution Margin per unit=$ 638550/4950 drum sets= 129

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