connect ch-21

The following costs result from the production and sale of 4,050 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $255 each. The company has a 30% income tax rate.

Variable production costs Plastic for casing $ 72,900 Wages of assembly workers 336,150 Drum stands 109,350 Variable selling costs Sales commissions 64,800 Fixed manufacturing costs Taxes on factory 10,500 Factory maintenance 21,000 Factory machinery depreciation 81,000 Fixed selling and administrative costs Lease of equipment for sales staff 21,000 Accounting staff salaries 71,000 Administrative management salaries 151,000

Required: 1. Prepare a contribution margin income statement for the company.

TOM THOMPSON COMPANY Contribution Margin Income Statement

For Year Ended December 31, 2013 Sales Variable costs:

Total variable costs Contribution margin Fixed costs

Total fixed costs

2.1 Compute its contribution margin per unit.

Chapter 21 Cost-volume-profit analysis (break even) http://ezto.mheducation.com/hm.tpx

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TOM THOMPSON COMPANY Contribution Margin Income Statement (partial)

For Year Ended December 31, 2013 Per Unit

Sales Variable costs:

Total variable costs Contribution margin

Expanded table Difficulty: Medium Learning Objective: 21-A1 Compute the contribution margin and describe what it reveals about a company's cost structure.

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eBook & ResourcesReferences

Chapter 21 Cost-volume-profit analysis (break even) http://ezto.mheducation.com/hm.tpx

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