The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate.

Required 1. Prepare a contribution margin income statement for the company.
2. Compute its contribution margin per unit and its contribution margin ratio.
Analysis Component 3. Interpret the contribution margin and contribution margin ratio from part 2.

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Variable production costs Plastic for casing .... Wages of assembly workers Drum stands Variable selling costs Sales commissions..... Fixed manufacturing costs Taxes on factory $ 17,000 82,000 26,000 15,000 Factory maintenance. Factory machinery depreciation.. Fixed selling and administrative costs Lease of equipment for sales staff. Accounting staff salaries .... Administrative management salaries. 5,000 10,000 40,000 10,000 35,000 125,000