The following costs result from the production and sale of 4,850 drum sets manuf

ID: 2391999 • Letter: T

Question

The following costs result from the production and sale of 4,850 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $335 each. The company has a 30% income tax rate.

Required:

1. Prepare a contribution margin income statement for the company. COMPLETE AND CORRECT!!!
2. Compute its contribution margin per unit and its contribution margin ratio. NEED HELP!!!!

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Prepare a contribution margin income statement for the company.

Compute its contribution margin per unit and its contribution margin ratio. (Round Contribution margin ratio to nearest whole percentage.)

Variable production costs Plastic for casing $ 164,900 Wages of assembly workers 480,150 Drum stands 208,550 Variable selling costs Sales commissions 155,200 Fixed manufacturing costs Taxes on factory 6,500 Factory maintenance 13,000 Factory machinery depreciation 73,000 Fixed selling and administrative costs Lease of equipment for sales staff 13,000 Accounting staff salaries 63,000 Administrative management salaries 143,000

Explanation / Answer

Required 2 : Answer

TIGHT DRUMS COMPANY

Contribution Margin Income Statement (partial)

For Year Ended December 31, 2017

Per Unit

$335

Plastic for casing = $164900/4850

$34

Wages of assembly workers =$480150/4850

$99

Drum stands = $208550/4850

$43

Sales commissions = $155200/4850

$32

Total variable costs (B)

$208

$127

Contribution margin ratio =C/A

38%

Note:

*Contribution margin ratio = (contribution/sales)*100

*So, contribution margin of 38% of sales revenue is available to cover fixed expenses.

Required 2 : Answer

TIGHT DRUMS COMPANY

Contribution Margin Income Statement (partial)

For Year Ended December 31, 2017

Per Unit

Sales

$335

Variable costs:

Plastic for casing = $164900/4850

$34

Wages of assembly workers =$480150/4850

$99

Drum stands = $208550/4850

$43

Sales commissions = $155200/4850

$32

Total variable costs (B)

$208

Contribution margin (A-B)

$127

Contribution margin ratio =C/A

38%