Question

The following costs result from the production and sale of 4,450 drum sets manufactured by Tight Drums Company for the year ended December 31, 2019. The drum sets sell for $295 each. The company has a 30% income tax rate.

Variable production costs
Plastic for casing $185,000
Wages of assembly workers 510,000
Drum stands 230,000
Variable selling costs
Sales commissions 175,000
Fixed manufacturing costs
Taxes on factory 5,000
Factory maintenance 10,000
Factory machinery depreciation 70,000
Fixed selling and administrative costs
Lease of equipment for sales staff 10,000
Accounting staff salaries 60,000
Administrative management salaries 140,000

Required:
Prepare a contribution margin income statement for the company.

Answer 1

Step-by-step explanation:

Sales 1,312,750 [4450*295]

Variable Costs

Variable production costs :

Plastic for casing 185,000

Wages of assembly workers 510,000

Drum stands 230,000

Variable selling costs :

Sales commission 175,000

Total Variable Costs 1,100,000

Contribution Margin 312,750

Less: Fixed Costs

Taxes on factory 5000

Factory maintenance 10,000

Factory machinery depreciation 70,000

Lease of equipment for sales staff 10,000

Accounting staff salaries 60,000

Administrative management salaries 140,000

Total fixed costs 295,000

Profit Before Tax 17,750

Less: Income tax [17,750*30%] 5,350

Net income 12,425