The following costs result from the production and sale of 12,000 CD sets manufactured by Gilmore Company for the year ended December 31, 2019. The CD sets sell for $18 each. The company has a 25% income tax rate. Variable manufacturing costs Plastic for CD sets . . . . . . . . . . . . . . . . . . . . . $ 1,500 Wages of assembly workers . . . . . . . . . . . . . 30,000 Labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Variable selling costs Sales commissions . . . . . . . . . . . . . . . . . . . . 6,000 Fixed manufacturing costs Rent on factory . . . . . . . . . . . . . . . . . . . . . . . . $ 6,750 Factory cleaning service . . . . . . . . . . . . . . . . 4,520 Factory machinery depreciation . . . . . . . . . . 20,000 Fixed selling and administrative costs Lease of office equipment . . . . . . . . . . . . . . . 1,050 Systems staff salaries . . . . . . . . . . . . . . . . . . 15,000 Administrative management salaries . . . . . . 120,000 Required 1. Prepare a contribution margin income statement for the year. 2. Compute its contribution margin per unit and its contribution margin ratio. Analysis Component 3. Interpret the contribution margin and contribution margin ratio from part 2.
The following costs result from the production and sale of 12,000 CD sets manufactured by Gilmore
Company for the year ended December 31, 2019. The CD sets sell for $18 each. The company has a 25%
income tax rate.
Variable
Plastic for CD sets . . . . . . . . . . . . . . . . . . . . . $ 1,500
Wages of assembly workers . . . . . . . . . . . . . 30,000
Labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Variable selling costs
Sales commissions . . . . . . . . . . . . . . . . . . . . 6,000
Fixed manufacturing costs
Rent on factory . . . . . . . . . . . . . . . . . . . . . . . . $ 6,750
Factory cleaning service . . . . . . . . . . . . . . . . 4,520
Factory machinery
Fixed selling and administrative costs
Lease of office equipment . . . . . . . . . . . . . . . 1,050
Systems staff salaries . . . . . . . . . . . . . . . . . . 15,000
Administrative management salaries . . . . . . 120,000 Required
1. Prepare a contribution margin income statement for the year.
2. Compute its contribution margin per unit and its contribution margin ratio.
Analysis Component
3. Interpret the contribution margin and contribution margin ratio from part 2.
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