Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate.

Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1

The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate.

    

Variable production costs
Plastic for casing	$	17,000
Wages of assembly workers		82,000
Drum stands		26,000
Variable selling costs
Sales commissions		15,000
Fixed manufacturing costs
Taxes on factory		5,000
Factory maintenance		10,000
Factory machinery 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.	Prepare a contribution margin income statement for the company.
	Explanation: 1. Sales ($500 × 1,000) = $500,000 Income tax (135,000 × 25%) = $33,750