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, 2019. The drum sets sell for $500 each. The company has a 25% income tax rate. Variable production costs Plastic for casing $ 17,000 Wages of assembly workers 82,000 Drum stands 26,000 Variable selling costs Sales commissions 15,000 Fixed manufacturing costs Taxes on factory 5,000 Factory maintenance 10,000 Factory machinery depreciation 40,000 Fixed selling and administrative costs Lease of equipment for sales staff 10,000 Accounting staff salaries 35,000 Administrative management salaries 125,000 Required: 1. Prepare a contribution margin income statement for the year. 2. Compute its contribution margin per unit and its contribution margin ratio. 3. For each dollar of sales, how much is left to cover fixed costs and contribute to operating income?
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, 2019. The drum sets sell for $500 each. The company has a 25% income tax rate. Variable production costs Plastic for casing $ 17,000 Wages of assembly workers 82,000 Drum stands 26,000 Variable selling costs Sales commissions 15,000 Fixed manufacturing costs Taxes on factory 5,000 Factory maintenance 10,000 Factory machinery depreciation 40,000 Fixed selling and administrative costs Lease of equipment for sales staff 10,000 Accounting staff salaries 35,000 Administrative management salaries 125,000 Required: 1. Prepare a contribution margin income statement for the year. 2. Compute its contribution margin per unit and its contribution margin ratio. 3. For each dollar of sales, how much is left to cover fixed costs and contribute to operating income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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, 2019. The drum sets sell for $500 each. The company has a 25% income tax rate.
| Variable production costs | |||
| Plastic for casing | $ | 17,000 | |
| Wages of assembly workers | 82,000 | ||
| Drum stands | 26,000 | ||
| Variable selling costs | |||
| Sales commissions | 15,000 | ||
| Fixed |
|||
| Taxes on factory | 5,000 | ||
| Factory maintenance | 10,000 | ||
| Factory machinery |
40,000 | ||
| Fixed selling and administrative costs | |||
| Lease of equipment for sales staff | 10,000 | ||
| Accounting staff salaries | 35,000 | ||
| Administrative management salaries | 125,000 | ||
Required:
1. Prepare a contribution margin income statement for the year.
2. Compute its contribution margin per unit and its contribution margin ratio.
3. For each dollar of sales, how much is left to cover fixed costs and contribute to operating income?
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