Question

The following costs result from the production and sale of 4,900 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $340 each. The company has a 35% income tax rate. Variable production costs Plastic for casing $ 171,500 Wages of assembly workers 490,000 Drum stands 215,600 Variable selling costs Sales commissions 161,700 Fixed manufacturing costs Taxes on factory 6,000 Factory maintenance 12,000 Factory machinery depreciation 72,000 Fixed selling and administrative costs Lease of equipment for sales staff 12,000 Accounting staff salaries 62,000 Administrative management salaries 142,000 Required: 1. Prepare a contribution margin income statement for the company. 2. Compute its contribution margin per unit and its contribution margin ratio.

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

The following costs result from the production and sale of 4,900 drum sets manufactured. The drum sets sell for $340 each.

Variable production costs:

Plastic for casing $ 171,500

Wages of assembly workers 490,000

Drum stands 215,600

Variable selling costs Sales commissions 161,700

Total= $1,038,800

Fixed manufacturing costs:

Taxes on factory 6,000

Factory maintenance 12,000

Factory machinery depreciation 72,000

Total= 90,000

Fixed selling and administrative costs:

Lease of equipment for sales staff 12,000

Accounting staff salaries 62,000

Administrative management salaries 142,000

Total= 216,000

The company has a 35% income tax rate.

Contribution format income statement:

Revenues= 4900*340= 1,666,000

Variable costs= 1,038,800 (-)

Contribution margin= 627,200

Fixed manufacturing costs= 90,000 (-)

Fixed selling and administrative costs= 216,000 (-)

Net operating income= 321,200

Tax= 112,420 (-)

Net income= $208,780