Budgeted Contribution Income Statement November 2017 $450,000 Sales (1,800 units) Less variable costs Variable cost of goods sold Direct materials (10 ounces / unit) Direct labor (1.2 labor hours / unit) Manufacturing overhead (0.25 machine hours / unit) $90,000 36,000 27,000 $153,000 108,000 elling (based directly on units) 261,000 189,000 Contribution margin Less fixed cost Manufacturing overhead Selling Administrative 80,000 60,000 21,000 161,000 Net income Earlier in the year, demand for their product increased sharply. They raised the price some in an attempt to optimize profitability. Acquiring additional materials was not a big problem. In fact, their supplier was happy to see them raise their quantity per order. Conversely, labor was a more difficult problem. The community around the plant had low unemployment and a fairly stable population. Thus, the only option was to offer the current employees overtime at 1.5 times their normal hourly wage. And, the only option with the machinery was to run it more hours and "baby" it so that it would not breakdown Overall the results at the end of the month looked pretty good Actual Contribution Income Statement November 2017 $687,500 Sales (2,500 units) Less variable costs Variable cost of goods sold Direct materials (25,500 ounces) Direct labor (3,200 labor hours) Manufacturing overhead (550 machine hours) $125,000 57,500 48,750 $231,250 188,000 Selling (based directly on units) 419,250 268,250 Contribution margin Less fixed cost Manufacturing overhead Selling Administrative 78,000 75,000 23,000 176,000 Net income