table {mso-displayed-decimal-separator:"\,"; mso-displayed-thousand-separator:"\.";} tr {mso-height-source:auto;} col {mso-width-source:auto;} td {padding-top:1px; padding-right:1px; padding-left:1px; mso-ignore:padding; color:black; font-size:11.0pt; font-weight:400; font-style:normal; text-decoration:none; font-family:Calibri, sans-serif; mso-font-charset:0; text-align:general; vertical-align:bottom; border:none; white-space:nowrap; mso-rotate:0;} .xl16 {background:#FFE699; mso-pattern:black none;} .xl18 {font-weight:700; background:#FFE699; mso-pattern:black none;}

The following costs rsult from the production and sale of 480,000 CD sets manufactured by
Trace Company for the year ended December 31, 2011. The CD sets sell for $4.50 eeach. The
company has a 25% income tax rate.
Variable Manufacturing Costs
Plastic for CD sets					43.200
Wages of Assembly Workers					600.000
Labelling					86.400
Variable Selling Costs
Sales Commissions					48.000
Fixed Manufacturing Costs
Rent on Factory					100.000
Factory Cleaning Service					75.000
Factory Machinery Depreciation					125.000
Fixed Selling and Administrative Costs
Lease of Office Equipment					120.000
Systems Staff Salaries					600.000
Administrative Management Salaries					300.000
TASK
1. Prepare a contribution margin income statement for the company.
2. Compute its contribution margin per unit and its contribution margin ratio
3. Interpret the contribution margin and contributon margin ratio from Part 2