Contribution margin income statement and contribution margin ratio LO A1 The fol
ID: 2485060 • Letter: C
Question
Contribution margin income statement and contribution margin ratio LO A1
The following costs result from the production and sale of 4,250 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $275 each. The company has a 30% income tax rate.
The following costs result from the production and sale of 4,250 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $275 each. The company has a 30% income tax rate.
Explanation / Answer
Solution:
1)
TOM THOMPSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2013
Sales
$1,164,500
Variable Costs:
Plastic for Casting
$93,500
Wages of assembly workers
$369,750
Drum stands
$131,750
Sales Commission
$85,000
Total Variable Cost
$680,000
Contribution Margin
(Sales - Total Variable Cost)
$484,500
Fixed Costs:
Taxes on factory
$12,500
Factory maintenance
$25,000
factory machinery depreciation
$85,000
Lease of equipment for sales staff
$25,000
Accounting staff salaries
$75,000
Administrative management salaries
$155,000
Total Fixed Costs
$377,500
Operating Profit / (loss)
[Contribution Margin - Total Fixed Costs)
$107,000
Income Tax @ 30%
$32,100
Net Income
$74,900
2)
TOM THOMPSON COMPANY
Contribution Margin Income Statement (partial)
For Year Ended December 31, 2013
Sales
$1,164,500
Variable Costs:
Plastic for Casting
$93,500
Wages of assembly workers
$369,750
Drum stands
$131,750
Sales Commission
$85,000
Total Variable Cost
$680,000
Contribution Margin
(Sales - Total Variable Cost)
$484,500
Units manufacturing and sold
4,250 drum
Contribution Margin Per Unit
$114.00
TOM THOMPSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2013
Sales
$1,164,500
Variable Costs:
Plastic for Casting
$93,500
Wages of assembly workers
$369,750
Drum stands
$131,750
Sales Commission
$85,000
Total Variable Cost
$680,000
Contribution Margin
(Sales - Total Variable Cost)
$484,500
Fixed Costs:
Taxes on factory
$12,500
Factory maintenance
$25,000
factory machinery depreciation
$85,000
Lease of equipment for sales staff
$25,000
Accounting staff salaries
$75,000
Administrative management salaries
$155,000
Total Fixed Costs
$377,500
Operating Profit / (loss)
[Contribution Margin - Total Fixed Costs)
$107,000
Income Tax @ 30%
$32,100
Net Income
$74,900
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