The following costs result from the production and sale of 4,000 drum sets manufactured by Vince Drum Company for the year ended December 31, 2011. The drum sets sell for $250 each. The company has a 25% income tax rate.
|
Variable production costs |
|
|
Plastic for casing |
68,000 |
|
Wages of assembly workers |
328,000 |
|
Drum stands |
104,000 |
|
Variable selling costs |
|
|
Sales commissions |
60,000 |
|
Fixed manufacturing costs |
|
|
Taxes on factory |
10,000 |
|
Factory maintenance |
20,000 |
|
Factory machinery depreciation |
80,000 |
|
Fixed selling administrative costs |
|
|
Lease of equipment for sales staff |
20,000 |
|
Accounting staff salaries |
70,000 |
|
Administrative management salaries |
150,000 |
Required
1. Prepare a contribution margin income statement for the company
2. Compute its contribution margin per unit and contribution margin ratio.
3. Interpret the contribution margin ratio from part 2.