Question

The following costs result from the production and sale of 4,850 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $335 each. The company has a 30% income tax rate.

  

Variable production costs
Plastic for casing	$	164,900
Wages of assembly workers		480,150
Drum stands		208,550
Variable selling costs
Sales commissions		155,200
Fixed manufacturing costs
Taxes on factory		6,500
Factory maintenance		13,000
Factory machinery depreciation		73,000
Fixed selling and administrative costs
Lease of equipment for sales staff		13,000
Accounting staff salaries		63,000
Administrative management salaries		143,000

Required:

1. Prepare a contribution margin income statement for the company. COMPLETE AND CORRECT!!!
2. Compute its contribution margin per unit and its contribution margin ratio. NEED HELP!!!!

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Prepare a contribution margin income statement for the company.

TIGHT DRUMS COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales $1,624,750 Variable costs: Plastic for casing 164,900 Wages of assembly workers 480,150 Drum stands 208,550 Sales commissions 155,200 Total variable costs 1,008,800 Contribution margin 615,950 Fixed costs Taxes on factory 6,500 Factory maintenance 13,000 Factory machinery depreciation 73,000 Lease of equipment for sales staff 13,000 Accounting staff salaries 63,000 Administrative management salaries 143,000 Total fixed costs 311,500 Pretax income 304,450 Income tax 91,335 Net income $213,115 Compute its contribution margin per unit and its contribution margin ratio. (Round Contribution margin ratio to nearest whole percentage.) TIGHT DRUMS COMPANY Contribution Margin Income Statement (partial) For Year Ended December 31, 2017 Per Unit Sales Variable costs: Plastic for casing Wages of assembly workers Drum stands Sales commissions Total variable costs Contribution margin

Answer 1

Required 2 : Answer

TIGHT DRUMS COMPANY
Contribution Margin Income Statement (partial)
For Year Ended December 31, 2017
		Per Unit
Sales		$335
Variable costs:
Plastic for casing = $164900/4850	$34
Wages of assembly workers =$480150/4850	$99
Drum stands = $208550/4850	$43
Sales commissions = $155200/4850	$32
Total variable costs (B)		$208
Contribution margin (A-B)		$127
Contribution margin ratio =C/A		38%

Note:

*Contribution margin ratio = (contribution/sales)*100

*So, contribution margin of 38% of sales revenue is available to cover fixed expenses.

Required 2 : Answer

TIGHT DRUMS COMPANY

Contribution Margin Income Statement (partial)

For Year Ended December 31, 2017

Per Unit

Sales

$335

Variable costs:

Plastic for casing = $164900/4850

$34

Wages of assembly workers =$480150/4850

$99

Drum stands = $208550/4850

$43

Sales commissions = $155200/4850

$32

Total variable costs (B)

$208

Contribution margin (A-B)

$127

Contribution margin ratio =C/A

38%

Note:

*Contribution margin ratio = (contribution/sales)*100

*So, contribution margin of 38% of sales revenue is available to cover fixed expenses.