Contribution margin income statement and ratio
Not what you're looking for?
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)
Purchase this Solution
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.
Purchase this Solution
Free BrainMass Quizzes
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.