Contribution Margin: Calvin and Susan Sherman set up a company called Heavenly Music Incorporated. They provide music
Question:
Contribution Margin:
Calvin and Susan Sherman set up a company called Heavenly Music Incorporated. They provide music equipment like drums around the Washington, D.C. area for various musical artist and aspiring musical artists. The drum sets sell 1,000 for $500 each for the year ended December 31. The tax rate is 21%?
Variable production costs
Plastic for casing - $17,000
Wage of assembly workers - $82,000
Drum stands - $26,000
Selling and Administrative-$15,000
Fixed manufacturing costs
Taxes on factory - $5,000
Factory maintenance - $10,000
Factory machine depreciation - $40,000
Fixed selling and administrative costs
Lease of equipment for sales staff - $10,000
Accounting staff salaries - $35,000
Administrative management salaries - $125,000
REQUIRED
1. Compute the contribution margin.
2. Compute the contribution margin ratio.
3. Compute the break-even in sales units.
4. Compute the break-even in sales dollars.
5. Compute the margin of safety in units.
6. Contribution income statement for the year end.
7. Compute the unit sales required for a monthly after-tax profit of $50,000.
Expert Answer:
1 To compute the contribution margin we need to subtract the total variable costs from the revenue R... View the full answer
