Chapter 21, Problem 1APSA

To determine

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.

To determine

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.

To determine

3. To determine:-

Now, we are required to interpret the contribution margin and contribution margin ratio computed above for Tight Drums Company.