Question

Los Angeles Lakers Tic Seal - Chapter 50 Problem 05-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 1000 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. $ 17,eee 82,eee 26,000 15,000 Variable production costs Plastic for casing Wages of assembly workers Variable selling costs Sales comissions Fixed manufacturing costs Taxes on factory Factory maintenance Factory machinery depreciation Fixed selling and administrative costs Lease of equipment for sales staff Accounting statt salaries Administrative management salaries 1e,saa 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? Complete this uestion by entering your answers in the tabs below Required 1 Required 2 Rered < Prev 5 9 Next > MacBook Pro

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.

Answer 1

Contribution Margin Income Statement

Sales		500,000
Less: variable costs
Plastic for Casting	17000
Wages for assembly workers	82000
Drum Stands	26000
Sales Commission	15000	140000
Contribution Margin		360000
Less: Fixed Costs
Taxes on factory	5000
Factory Maintenance	10000
Factory Machinery Depreciation	40000
Lease of equipment for sales staff	10000
Accounting Staff salaries	35000
Admin management salaries	125000	225000
Net Income		135000

2.

• Contribution margin per unit = 360,000/1000 = 360
• Contribution margin ratio = 360/500*100 = 72%

3.Every dollar, $1 * 72% = 0.72$ is left for Fixed costs and operating income

Please comment in case of any query regarding the solution.