The following costs result from the production and sale of 12,000 CD sets manufactured by Gilmore Company for the year ended December 31, 2013. The CD sets sell for $ 18 each. The company has a 25% income tax rate.
Variable manufacturing costs:
Plastic for CD sets . . . . . . . . . . . . . . . . . . . . . . $ 1,500
Wages of assembly workers . . . . . . . . . . . . . . . 30,000
Labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Variable selling costs Sales commissions . . . . . . . . . . . . . . . . . . . . . . . 6,000
Fixed manufacturing costs: Rent on factory . . . . . . . . . . . . . . . . . . . . . . . . . 6,750
Factory cleaning service . . . . . . . . . . . . . . . . . . 4,520
Factory machinery depreciation . . . . . . . . . . . . 20,000
Fixed selling and administrative costs:
Lease of office equipment . . . . . . . . . . . . . . . . . 1,050
Systems staff salaries . . . . . . . . . . . . . . . . . . . . . 15,000
Administrative management salaries . . . . . . . . . 120,000
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.