Contribution Margin Income Statement Susan Young is an attorney for a small law firm in Arizona. She is also a part-time inventor and an avid golfer. One day Susan’s golf foursome included a man named Henry Jones, a manufacturer of Christmas ornaments. Henry explained to Susan that he manufactures an ornament everyone loves, but stores will not carry the ornaments because they are very fragile and often break during shipping. Susan told Henry about a plastic box she had developed recently that would protect such fragile items during shipping. After crash testing the plastic box, Henry offered Susan a contract to purchase 100,000 of the boxes for $2.20 each. Susan is convinced that the box has many applications and that she can obtain future orders.

Production of the plastic boxes will take one year. Estimated costs for the first year are as follows:

Required:
1. Using the information provided, determine Susan’s contribution margin and projected profit at a sales level of 100,000 boxes.
2. If Susan’s salary as an attorney is $44,500, determine how many boxes Susan must sell to earn profits equal to her salary.

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Lease payments on building Lease payments on machine Cost to retool machine Depreciation on machine Direct materials Direct labor Indirect materials and other manufacturing overhead Interest on loan... Administrative salaries $800 per month $2,200 per month $10,000 $9,600 $0.70 per box $0.30 per box $0.10 per box $2,500 $15,000