1 part 2

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1 part 2

The following costs result from the production and sale of 4,600 drum sets manufactured by Tight Drums Company for the year ended
December 31. The drum sets sell for $310 each.
Variable costs
Plastic for casing
Wages of assembly workers
Drum stands
Sales commissions
Fixed costs
Taxes on factory
Factory maintenance
Factory machinery depreciation
Lease of equipment for sales staff
Accounting staff salaries
Administrative salaries
$ 133, 400
432, 400
174,800
124, 200
9,000
18,000
78,000
18,000
68,000
148,000
Required:
1. Prepare a contribution margin income statement for the year.
2. Compute contribution margin per unit and contribution margin ratio.
3. For each dollar of sales, how much is left to cover fixed costs and contribute to income?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
For each dollar of sales, how much is left to cover fixed costs and contribute to income? (Round your answer to 2 decimal
places.)
For each dollar of sales, how much is left to cover fixed costs and contribute to income?
Transcribed Image Text:The following costs result from the production and sale of 4,600 drum sets manufactured by Tight Drums Company for the year ended December 31. The drum sets sell for $310 each. Variable costs Plastic for casing Wages of assembly workers Drum stands Sales commissions Fixed costs Taxes on factory Factory maintenance Factory machinery depreciation Lease of equipment for sales staff Accounting staff salaries Administrative salaries $ 133, 400 432, 400 174,800 124, 200 9,000 18,000 78,000 18,000 68,000 148,000 Required: 1. Prepare a contribution margin income statement for the year. 2. Compute contribution margin per unit and contribution margin ratio. 3. For each dollar of sales, how much is left to cover fixed costs and contribute to income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 For each dollar of sales, how much is left to cover fixed costs and contribute to income? (Round your answer to 2 decimal places.) For each dollar of sales, how much is left to cover fixed costs and contribute to income?
Expert Solution
Step 1

Lets understand the basics.

Contribuation margin income statement is a statement which shows how the sales, variable cost and fixed cost are divided and cost are incurred.

Contribution is a sales less variable cost of the company.  In other words it shows how much contribution sales generated.

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