Problem 5-1A Contribution margin income statement and contribution margin ratio LO A1

The following costs result from the production and sale of 4,500 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $300 each. The company has a 35% income tax rate.

Variable production costs
Plastic for casing	$	121,500
Wages of assembly workers		414,000
Drum stands		162,000
Variable selling costs
Sales commissions		112,500
Fixed manufacturing costs
Taxes on factory		15,000
Factory maintenance		30,000
Factory machinery depreciation		90,000
Fixed selling and administrative costs
Lease of equipment for sales staff		30,000
Accounting staff salaries		80,000
Administrative management salaries		160,000

Required:

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

Prepare a contribution margin income statement for the company.

TIGHT DRUMS COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2017
Sales
Variable costs:
Total variable costs
Contribution margin
Fixed costs
Total fixed costs

Compute its contribution margin per unit and its contribution margin ratio. (Round Contribution margin ratio to nearest whole percentage.)

TIGHT DRUMS COMPANY
Contribution Margin Income Statement (partial)
For Year Ended December 31, 2017
		Per Unit
Sales
Variable costs:
Total variable costs
Contribution margin