The following costs result from the production and sale of 1,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $500 each. The company has a 25% income tax rate.

Required
1. Prepare a contribution margin income statement for the company.
2. Compute its contribution margin per unit and its contribution margin ratio.
Analysis Component
3. Interpret the contribution margin and contribution margin ratio from part 2.

Transcribed Image Text:

Variable production costs Fixed manufacturing costs Plastic for casing Wages of assembly workers Drum stands 17.000 82,000 26,000 Taxes on factory Factory maintenance Factory machinery depreciation $ 5,000 10,000 40,000 Variable selling costs Fixed selling and administrative costs Sales commissions. 15,000 Lease of equipment for sales staff. Accounting staff salaries Administrative management salaries 10,000 35,000 125,000