Problem 5-1A Contribution margin income statement and contribution margin ratio
ID: 2428670 • Letter: P
Question
Problem 5-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 4,050 drum sets manufactured by Tight Drums Company for the year ende December 31, 2017. The drum sets sell for $255 each. The company has a 30% income tax rate. Variable production costs Plastic for casing Wages of assembly workers Drum stands $ 72,900 336, 150 109,35e Variable selling costs Sales commissions 64,see Fixed manufacturing costs Taxes on factory Factory maintenance Factory machinery depreciation 18,500 21,000 81,800 Fixed selling and administrative costs Lease of equipment for sales staff Accounting staff salaries Administrative management salaries 21,000 71,000 151,000Explanation / Answer
Solution 1:
Solution 2:
Contribution margin ratio = Contribution margin per unit / Selling price per unit = $111 / $255 = 44%
Tight Drums Company Contribution Margin Income Statement For year ended December 31, 2017 Particulars Per Unit Amount Sales $255.00 $1,032,750.00 Variable Costs: Plastic for Casing $18.00 $72,900.00 Wages for assembly workers $83.00 $336,150.00 Drum Stands $27.00 $109,350.00 Sales Commissions $16.00 $64,800.00 Contribution Margin $111.00 $449,550.00 Fixed Costs: Taxes on Factory $10,500.00 Factory Maintenance $21,000.00 Factory Machinery Depreciation $81,000.00 Lease of equipment for sales staff $21,000.00 Accounting Staff Salaries $71,000.00 Administrative Management Salaries $151,000.00 Net Operating Income $94,050.00 Income Tax (30%) $28,215.00 Earnings After Tax $65,835.00