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|
|Variable selling costs|
|Fixed manufacturing costs|
|Taxes on factory||5,000|
|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
Contribution margin income statement
The statement calculated income based on variable and fixed functions. The statement begins with sales and...
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fromChapter 22 / Lesson 20
Understand what the contribution margin is. Learn the definition of contribution margin and understand its importance in business. Discover how to calculate it through examples.