The following costs result from the production and sale of 4,550 drum sets manufactured by Tight Drums Company for the year ended December 31, 2015.

The following costs result from the production and sale of 4,550 drum sets manufactured by Tight Drums Company for the year ended December 31, 2015. The drum sets sell for $305 each. The company has a 40% income tax rate.

 
            
  Variable production costs          
     Plastic for casing     $     127,400 
     Wages of assembly workers           423,150 
     Drum stands           168,350 
  Variable selling costs          
     Sales commissions           118,300 
  Fixed manufacturing costs          
     Taxes on factory            9,500 
     Factory maintenance           19,000 
     Factory machinery depreciation           79,000 
  Fixed selling and administrative costs          
     Lease of equipment for sales staff           19,000 
     Accounting staff salaries           69,000 
     Administrative management salaries           149,000 

 
Required:
1.     Prepare a contribution margin income statement for the company.






2. Compute its contribution margin per unit and its contribution margin ratio. (Round Contribution margin ratio to nearest whole percentage.)

Explanation:

1.

Sales ($305 × 4,550) = $1,387,750

Income tax (206,050 × 40%) = $82,420