The following costs result from the production and sale of 1,000 drum sets manuf

Question

The following costs result from the production and sale of 1,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017, The drum sets sell for $500 each. The company has a 25% income tax rate Variable production costs Plastic for casing Wages of assembly workers Drum stands $ 17,000 82,000 26,000 Variable selling costs Sales commissions 15,000 Fixed manufacturing costs Taxes on factory Factory maintenance Factory machinery depreciation 5,000 10,000 40,000 Fixed selling and administrative costs Lease of equipment for sales staff Accounting staff salaries Administrative management salaries 10,000 35,000 125,000

Explanation / Answer

Answer:-

Contribution Margin ratio =Contribution Margin/Sales*100

=($375000/$500000)*100 = 75%

Tight Drums Company Contribution margin income statement (Partial) For the year ended December 31,2017 Particulars Amount Per unit $ $ Sales 1000 units*$500 per unit 500000 500 Less:- Variable costs Plastic for casting 17000 17 Wages for assembly workers 82000 82 Drum stands 26000 26 Total variable costs 125000 Contribution Margin 375000 375

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