Explore BrainMass

Explore BrainMass

    Contribution margin income statement and ratio

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The following costs result from the production and sale of 2,000 drums sets manufactured by Harris Drum Company for the year ended December 31, 2009. 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.

    Analysis Component.
    3. Interpret the contribution margin and contribution margin ratio from #2 above.

    Variable production costs
    Plastic for casing $ 34,000
    Wages for assembly workers 164,000
    Drum stands 52,000

    Variable selling costs
    Sales commissions $30,000

    Fixed manufacturing costs
    Taxes on Factory $10,000
    Factory maintenance 20,000
    Factory machinery depreciation 80,000

    Fixed selling and administrative costs
    Lease of equipment for sales staff 20,000
    Accounting staff salaries 70,000
    Administrative management salaries 250,000

    (check figure to see if on right track with all calculations; Net income = $202,500)

    © BrainMass Inc. brainmass.com March 4, 2021, 10:37 pm ad1c9bdddf
    https://brainmass.com/business/leasing/contribution-margin-income-statement-and-ratio-347172

    Attachments

    Solution Summary

    Given a company's fixed and variable costs, selling price per unit and number of units sold, this solution illustrates how to prepare a contribution margin income statement for the company, compute its contribution margin per unit and its contribution margin ratio, and interpret the contribution margin and contribution margin ratio.

    $2.49

    ADVERTISEMENT