The following costs result from the production and sale of 1,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The Drum sets sell for $500 each. The company has a 25% income tax rate.

1. Prepare a contribution margin income statement for the company.

2. Compute its contribution margin per unit and its contribution margin ratio.

3. Interpret the contribution margin and contribution margin ratio from part 2.

Problem 21-1A Contribution margin income statement and contribution margin ratio A1g The following costs result from the production and sale of 1,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $500 each. The company has a 25% income tax rate. Variable production costs Fixed manufacturing costs Plastic for casing Wages of assembly workers Drum stands 17,000 82,000 26,000 Taxes on factory Factory maintenance Factory machinery depreciation S 5,000 10,000 40,000 Variable selling costs Fixed selling and administrative costs Lease of equipment for sales staff Accounting staff salaries Administrative management salaries 10,000 35,000 125,000 Sales commissions 15,000