The following costs result from the production and sale of 5,000 drum sets manufactured by Tight...
Question:
The following costs result from the production and sale of 5,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2015.
The drum sets sell for $350 each. The company has a 25% income tax rate.
| Variable production costs | |
| Plastic for casing | $185,000 |
| Wages of assembly workers | 510,000 |
| Drum stands | 230,000 |
| Variable selling costs | |
| Sales commissions | 175,000 |
| Fixed manufacturing costs | |
| Taxes on factory | 5,000 |
| Factory maintenance | 10,000 |
| Factory machinery depreciation | 70,000 |
| Fixed selling and administrative costs | |
| Lease of equipment for sales staff | 10,000 |
| Accounting staff salaries | 60,000 |
| Administrative management salaries | 140,000 |
1. Prepare a contribution margin income statement for the company.
2. Compute its contribution margin per unit and contribution margin ratio.
Contribution Margin Income Statement:
A contribution margin income statement produces the same net profit as a traditional income statement format. The contribution margin format is a managerial accounting tool which segregates costs as variable and fixed function.
Answer and Explanation: 1
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View this answerContribution margin income statement
The statement calculated income based on variable and fixed functions. The statement begins with sales and...
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