The following information is available for Dabney Company for 2012:

Sales revenue (at $20 per unit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000

Fixed manufacturing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000

Variable manufacturing costs (at $8 per unit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56,000

Fixed selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,500

Variable selling expenses (at $2 per unit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14,000

Required:

1. Prepare a contribution margin income statement.

2. Prepare a functional income statement.

3. Calculate the number of units sold.

4. Calculate the contribution margin per unit.

5. Interpretive Question: Why is a knowledge of the contribution margin more useful than a knowledge of the markup per unit when management has to make a decision about profitability?