
Introduction:-
Contribution margin income statement is a cost accounting tool used by the management for representing its revenues and expenses for decision making process for its products or services. This statement is generally used by organisations having multi product or service line in determining the contribution provided by each product or service and which product or service to continue or to drop.
1. To determine:-
Here, in the problem provided to us we are required to prepare a contribution margin income statement for Tight Drums Company for the year ended December 31, 2017.
Introduction:-
Contribution margin ratio is the ratio of contribution margin to total sales. The higher the ratio, the more money is available to cover the fixed costs and generate profits for the organisation. On the contrary, the lesser this ratio, the difficult it will be for the organisation to even cover its fixed cost.
2. To determine:-
Here, in the give problem we are required to ascertain the contribution margin provided by each unit and the contribution margin ratio for Tight drums company for the year ended 31 December, 2017.
3. To determine:-
Now, we are required to interpret the contribution margin and contribution margin ratio computed above for Tight Drums Company.

Want to see the full answer?
Check out a sample textbook solution
Chapter 21 Solutions
Fundamental Accounting Principles
- Solve my problemarrow_forwardSolution of all problemsarrow_forwardJones Manufacturing Co. Ltd. makes a product by way of three consecutive processes. Inspection takes place during the processing operation, at which point bad units are separated from good units and sold as scrap at $20 each. Normal losses are estimated to be 5% of input during the period. The following data relates to process 2 for the month of October. During October, 20,000 units valued at $400,000 were transferred from process 1 to process 2. Other costs incurred during the month were: Direct material added Direct labour Production overheads $272,000 $254,000 $ 120,400 At inspection, 3000 units were rejected as scrap. These units had reached the following degree of completion: Transfer from process 1 Direct material added Conversion costs 100% 80% 50% Work-in-progress at the end of October was 4,000 units and had reached the following degree of completion: Transfer from process 1 Direct material added 100% 60% 40% Conversion costs There were no unfinished goods in process 2 at the…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





