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?

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Answered: The following costs result from the…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5EB: Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90....

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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?

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