18-1

The following costs result from the production and sale of 5,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $350 each. The company has a 25% income tax rate.

Variable production costs
Plastic for casing	$	185,000
Wages of assembly workers		510,000
Drum stands		230,000
Variable selling costs
Sales commissions		175,000
Fixed manufacturing costs
Taxes on factory		5,000
Factory maintenance		10,000
Factory machinery depreciation		70,000
Fixed selling and administrative costs
Lease of equipment for sales staff		10,000
Accounting staff salaries		60,000
Administrative management salaries		140,000

Required:

1. Prepare a contribution margin income statement for the company. 2. Compute its contribution margin per unit and its contribution margin ratio.