The following costs result 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 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 part2.

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Variable manufacturing costs Plastic for CD sets.. Wages of assembly workers Labeling.. $43.200 600,000 86.400 Variable selling costs Sales commissions 48,000 Fixed manufacturing costs Rent on factory Factory cleaning service Factory machinery depreciation 100,000 75,000 125,000 Fixed selling and administrative costs 20,000 600,000 Lease of office equipment s staff salaries .